We have gained traction in the marketplace and restored operational rigour

Eric Benhamou Palm chairman

Profits were hit by the economic weakness which caused demand to fall, and by a price war with its rival Handspring.

Net losses for the period mounted to $25.2m, a harsh about turn from its net profits of $20.3m during the same period last year.

Revenue during the period also fell sharply to $290.6m from $522.2m a year earlier.

And the Christmas shopping season offers little relief for the firm since sales during the early autumn months include electronic organizers sent out early to shops ahead of their Yuletide sales.

Come-back

But the earnings were above the company's own predictions in November, and the company's chairman Eric Benhamou said revenues were much higher than they had been during the three months from June.

"This quarter's significant increase in revenue and improved results over the last quarter reflect that we have gained traction in the marketplace and restored operational rigour," Mr Benhamou said.

Palm predicted that its revenues would come in somewhere between $250m and $260 million over the three months from December to February, its fiscal third quarter.

This should then bounce back to between $290m and $300m during the following three months to May 2002, by which point it should have reached an operating break-even point.

Mr Benhamou is also currently the company's chief executive after the former chief, Carl Yankowski, resigned last month.

Palm shares rose ahead of the results which were released after the US stock markets had closed.