Room 4561
March 29, 2006
Mr. Andrew J. Brown
Senior Vice President and Chief Financial Officer
Palm, Inc.
950 West Maude Avenue
Sunnyvale, California 94085
Re: Palm, Inc.
Form 10-K for the Fiscal Year Ended June 3, 2005
Filed July 29, 2005
Form 10-Q for the Quarterly Period Ended December 2,
2005
Filed January 10, 2006
Form 8-K Filed December 20, 2005
Form 8-K Filed March 23, 2006
File No. 0-29597
Dear Mr. Brown:
We have reviewed your response letter dated March 9, 2006,
as
well as the filings referenced above, and have the following
comments. Where indicated, we think you should revise your
document
in response to these comments. If you disagree, we will consider
your explanation as to why our comments are inapplicable or a
revision is unnecessary. Please be as detailed as necessary in
your
explanation. After reviewing this information, we may raise
additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K for the Fiscal Year Ended June 3, 2005
Item 8. Financial Statements
Consolidated Statements of Cash Flows, page 54
1. We have read your response to prior comment number 2. Please
note
that the guidance that you refer to requires you to report the
necessary changes to your statements of cash flows in your next
periodic report, which appears to be your Form 10-Q for the period
ended February 28, 2006. The guidance you refer to also indicates
that if the changes are made in a later period, as you propose in
your response, the changes should be reported as a correction of
an
error. Please provide the appropriate disclosures in your next
quarterly filing.
Note 2. Significant Accounting Policies
Revenue Recognition, page 58
2. Please specifically identify and describe to us the products
for
which you recognize revenue in accordance with SOP 97-2.
Separately,
identify any products that involve software, but that you believe
are
not within the scope of SOP 97-2. Explain to us the nature of any
software provided with, or embedded in, those products and tell us
how you considered paragraph 2 of SOP 97-2 in determining the
appropriate revenue recognition guidance.
3. We note your disclosure that "no significant obligations
remain"
upon meeting the stated revenue recognition criteria for your
handheld computing products. Please describe to us, in detail,
the
nature of any remaining obligations that you consider to be
insignificant. As part of your response, identify the accounting
guidance that you are following in determining the impact of any
such
remaining obligations on your revenue recognition.
Form 10-Q for the Quarterly Period Ended November 30, 2005
Item 2. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations
Critical Accounting Policies, page 18
4. We have read your response to prior comment number 6. Please
explain to us why you believe that your current MD&A disclosures
regarding the $1 billion projection are sufficient. In this
regard,
we note that the earnings necessary to recover your domestic
deferred
tax assets must be recognized are over a period of time that may
exceed the amount of time since you began your handheld
operations.
Further, the amount of required earnings appears to far exceed any
amounts that you have recognized in your entire corporate history.
Finally, we note that you cite significant risks within your
filing
related to the fluctuations in your operating results, the
volatility
of the markets in which you operate, product development,
competition, and your relationships with the wireless carriers.
Based on the information above, we believe that your disclosure
should address the factors considered and assumptions used in
concluding that it is more-likely-than-not that the assets will be
realized. The disclosure should describe, in detail, the positive
and negative evidence that was considered and how that evidence
was
weighted. The disclosure should also identify the significant
assumptions made in developing the $1 billion projection and
explain
to readers why those assumptions are reasonable in light of both
your
recent and long-term earnings history. Quantitative information
should be provided to the extent practicable as well as
qualitative
information related to the specific risks described above.
Forms 8-K Filed December 20, 2005 and March 23, 2006
5. We have read your response to prior comment number 8 and do not
believe that your proposed disclosure adequately addresses our
concerns. Please revise this disclosure to provide more robust
disclosures related to why you believe that each exclusion from
your
GAAP results is necessary to enhance investors` overall
understanding
of your current financial performance, ongoing operations and
prospects for the future. Due to the nature of your presentation
and
the differing characteristics of the various items that you
exclude,
we believe that a separate discussion is warranted for each
individual item. In addition, expand your discussion of inherent
limitations from acknowledging their existence and the inherent
comparability issues to a detailed discussion of the limitations
associated with each item that is excluded. We may have further
comment.
As appropriate, please amend your filing and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response. Please submit all correspondence and
supplemental
materials on EDGAR as required by Rule 101 of Regulation S-T. You
may wish to provide us with marked copies of any amendment to
expedite our review. Please furnish a cover letter with any
amendment that keys your responses to our comments and provides
any
requested information. Detailed cover letters greatly facilitate
our
review. Please understand that we may have additional comments
after
reviewing any amendment and your responses to our comments.
You may contact Mark Kronforst, Assistant Chief Accountant,
at
(202) 551-3451 or me at (202) 551-3489 if you have any questions
regarding these comments.
Very truly yours,
Brad Skinner
Accounting Branch Chief
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Mr. Andrew J. Brown
Palm, Inc.
March 29, 2006
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