AmericanSpirit, note what was mentioned in Glenn's post:
....any acquisition bid would be made considerably more expensive by the tax liability related to Palm's spin-off from 3Com last year. Federal regulators gave the transaction tax-free status. But anyone purchasing more than 50 percent of Palm before June 2002 will potentially have to pay those taxes....
QUARTERLY RESULTS OF OPERATIONS
Q1FY00 THROUGH Q3FY01
media.corporate-ir.net
We've witnessed revenue guidance start from $575mm to a reduced range of $300-$315mm and the with latest guidance was reduced once more to $140-$160mm for Q4FY01, GP expected to be 25% (down from Q4FY00's 39.1%) and Palm will have approx. $300mm inventory charge. I can't recall if there was a break up fee after halting the XTND acquisition, but should be addressed this quarter if not next, and there are still separation costs from 3Com (did you know that when 3Com bought USRobotics they had no idea Palm was part of that company?). Palm also said to expect operating expenses, particularly sales, marketing and research and development costs would increase in the fourth quarter of fiscal 2001. I believe the $595.9mm in cash as of Mar 2 didn't include the $238.3mm, that was used to purchase restricted investments related to collateral deposits required under a lease agreement, and if they were successful in being able to sub-lease, or come to an amicable arrangement with Societe Generale Financial Corp., they could still have a portion of this to place back in the coffers... but these restricted investments won't be released to any third parties and might be needed to exercise one of their options, purchasing the land:
Palms SEC form 10-Q for period ending Mar 2, 2001
In November 2000, Palm entered into a seven-year master lease agreement with Societe Generale Financial Corporation relating to its future headquarters facility that will be constructed in San Jose, California. The property site is approximately 39 acres, and is intended to eventually accommodate 1.6 million square feet of general office facilities. Rental payments under the lease agreement will be indexed to the London Interbank Offered Rate, applied to the total cost of the lease. The total cost of the lease will include the cost of the land plus the construction cost of the first phase of the facilities (approximately 620,000 square feet), which together are expected to cost up to $460 million. Palm has the ability to purchase the property from the lessor at any time prior to the expiration of the lease for the remaining lease balance, and may, at its option, remarket the property prior to the end of the lease. Palm has guaranteed the payment and performance of the lessor under certain promissory notes made by the lessor with respect to the property. Under the terms of the lease agreements, Palm is required to place on deposit up to $460 million of investment securities as collateral for the term of the lease. As of March 2, 2001, the amount of the collateral was approximately $238 million. As the leased facilities are constructed and interest accrues on the amount funded by the lessor, the amount of cash collateral will increase over time. The investment securities are restricted as to their withdrawal from a third party trustee and are classified as restricted investments on Palm's balance sheet. Palm will continue to receive the interest income earned on the investments deposited as collateral.... We have postponed the construction of our new corporate headquarters in San Jose and we are reevaluating our real estate alternatives with the goal of reducing cash requirements. The operating lease agreement related to our new corporate headquarters contains covenants which require us to maintain certain financial ratios and adhere to a timeline in relation to the construction of the buildings. If we are unable to maintain compliance with these requirements, we may have to renegotiate the lease or cure it by exercising our option to purchase the land, which would require the use of our restricted investments currently held as collateral for our lease.
The next 6 months should be very interesting....
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