According to Palm, the company's key accomplishments during the quarter include:

• An 8.6 percent increase in pro forma gross margins to 29.1 percent, in line with previous guidance of 28 percent to 30 percent;

• Three expandable product introductions from the Solutions Group: the Palm i705 integrated wireless handheld for mobile professionals and enterprises, the Palm m130 color handheld for first-time customers, and the Palm m515 color handheld for executives;

• The shipment of 1.3 million Palm branded handhelds, bringing the cumulative total to 17.2 million, and contributing to the shipment of more than 21 million Palm OS handhelds;

• The early release of beta software for Palm OS 5 to licensees and developers at the PalmSource Conference and Expo;

• Reaching a total of more than 200,000 registered developers of the Palm OS platform.

Number one in Europe
Palm, Inc. is continuing to strengthen its leadership position in the European handheld computing market as well. According to GfK, an international market research organization (at http://www.gfk.com), Palm, Inc. is firmly in the lead with 42.5 percent of the handheld device market (as measured by units) for December/January 2002. This is 30.8 points ahead of its nearest competitor. These results show an increase in market share of 4.4 points on the previous period of October/November 2001 and growth of 1.6 points on the same period a year ago.

There were a number of key markets where Palm handhelds surged ahead to record significant gains on the October/November 2001 results. Notable achievements occurred in France, where the Palm handheld market share rose to 47.7 percent; Germany, where almost half of the market has been secured with 49 percent; Italy, which achieved 38.4 percent of the market; The Netherlands, which also grew significantly to reach 37.8 percent; and the UK, which achieved 43.5 percent market share. In each of these countries, Palm is the market leader.

The results demonstrate a very successful Christmas period for Palm Europe, which--supported by very well-received end-of-year promotions, including a special SD Card offer, as well as strong print, outdoor, and radio advertising campaigns--saw excellent sales of the Palm m100 and m500 series handhelds.

As fans of the Palm OS platform, we hope to see the company continue to make progress both in the U.S. and abroad as we look ahead to the rest of 2002. Let us also hope that this year proves to be more economically stable for everyone.

Michael Compeau is a Contributing Editor for PalmPower Magazine as well as the VP of Business Development and Planning for Cutting Edge Software (at http://www.cesinc.com), a subsidiary of Mobility Electronics.