Higher average selling prices for PDAs (personal digital assistants) and smart phones helped boost second-quarter revenue at PalmOne in the company's first quarter with financial results from newly acquired Handspring and without PalmSource, PalmOne said Thursday.

Second-quarter revenue for PalmOne's 2004 fiscal year was $271.2 million, up five per cent from last year's second-quarter revenue of $257.9 million. Even though unit shipments declined from 1.44 million units in last year's second quarter to 1.41 million in this year's second quarter, the average selling price of PalmOne devices rose from $160 to $172, the company said.

PalmOne's second quarter ended on November 30, a month after the company acquired Handspring and spun-off Palm OS developer PalmSource.

Smart-phones 'way forward'

The Treo 600 smart phone will help PalmOne carve out space in the growing smart-phone market, said Todd Bradley, president and CEO.

"We're at an inflection point in our history," Bradley said. The market for unconnected PDAs has declined steadily over the past few quarters, but sales of smart phones that combine a cell phone with a PDA are expected to rise sharply over the next few years, according to analysts.

PalmOne is hoping that its new focus on the smartphone market will help make the company profitable. In what is considered its strongest quarter on a seasonal basis, PalmOne recorded a net loss of $4.1 million in accordance with generally accepted accounting principles.

The company posted a net profit of $2.6 million from continuing operations, which includes the results from one month with Handspring's products and expenses, said Judy Bruner, senior vice president and chief financial officer. The company posted a net loss of $6.8 million from discontinued operations, which includes the two months in which PalmSource was part of the overall company, Bruner said.

PalmOne continues to do the majority of its business in the US, which accounted for 58 per cent of its revenue in the second quarter.

The company expects the next quarter's revenue to fall between $200 million and $215 million. However, it will post a net loss of about $15 million in the third quarter as it restructures to devote more resources to higher growth and higher margin products such as the Treo 600.