Sluggish demand and stiff competition has seen Palm Inc's revenue for the first fiscal quarter of 2002 drop by 47 per cent compared to the year-ago figure.

For the first quarter, which ended Aug 31, Palm reported revenue of $214.3 million, with a pro-forma net loss of $38.7 million, which translates into a loss of $0.07 per share.

That revenue figure is down from the $401 million the company reported in the first quarter of 2001. Palm has now reduced its expectations for the second quarter.

Judy Bruner, Palm's chief financial officer, said: "We did not see the seasonable increase we expected in August. In addition, we saw stronger-than-expected demand of low-end products."

Palm now expects its second-quarter revenue to be either flat or up slightly from the first quarter, Bruner said.

In addition, last week's terrorist attacks have added to difficulties in the market, she said: "The attacks add much further doubt and uncertainty to world economic forecasts.

"We believe these events are likely to lower consumer confidence and spending, and thus reduce the growth that was anticipated."

Palm shipped 750,000 devices during the quarter, roughly half what it shipped in the year-earlier quarter, Palm said.

Along with the downturn in the economy, Palm has also faced increased competition in the past year. Todd Kort, principal analyst with Gartner, said: "The competition in the PalmOS market has intensified quite a bit from a year ago, Sony in particular has made some gains."

In addition, Palm has not given its users need to move up to newer products, he said: "The Palm devices of today are not substantially different from a year ago. There is not a tremendous need to upgrade if you have an older Palm."

Also, PDAs (personal digital assistants) running Microsoft's competing PocketPC operating system have been gaining share against Palm.

Kort said: "A year ago, PocketPC devices were almost nowhere. Even Compaq didn't pick up until the fourth quarter."

In Compaq's second quarter this year, which ended June 30, the company shipped 450,000 of its iPaq handhelds, a 21 per cent increase from a year earlier, it said at the time.