Compensation, other costs hurt Palm’s profit

Palm Inc. reported a 61% drop in its third-quarter profit as speculation of a buyout continued to swirl.

Sales of the company’s Treo smart phones reached record levels, but Palm’s bottom line was hurt by increased costs, $5.7 million in stock-based compensation and $3.7 million in acquisition-related charges.

For the three months that ended March 2, the Sunnyvale, Calif.-based company said it earned $11.8 million, or 11 cents a share, on revenue of $410.5 million. A year earlier Palm earned $29.9 million, or 28 cents a share, on sales of $388.5 million.

Palm said that excluding stock-based compensation and other one-time items, it would have earned $16.5 million, or 16 cents a share, compared with $19.8 million, or 19 cents, a year earlier.

On that basis, analysts, on average, were expecting earnings of 12 cents a share on sales of $403.6 million, according to a poll by Thomson Financial.

For the fiscal fourth quarter, the company said it expected earnings of 10 cents to 13 cents a share on revenue of $400 million to $410 million.

Shares of Palm fell $1.71 to $17.74.