UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________________ FORM 10-K 5 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended June 3, 2005 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 000-29597 Palm, Inc. (Exact name of registrant as specified in its charter) Delaware 94-3150688 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 950 West Maude Sunnyvale, California 94085 (Address of principal executive offices and zip code) Registrant’s telephone number, including area code: (408) 617-7000 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001 par value Preferred Share Purchase Rights, $.001 par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such short er period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes 5 No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporat ed by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes 5 No The aggregate market value of the registrant’s Common Stock held by non-affiliates, based upon the closing price of the Common Stock on November 26, 2004, as reported by the Nasdaq National Market, was approximately $1,130,545,000. Shares of Common Stock held by each executive o ffi cer and director and by each person who owns 5% or more of the outstanding Common Stock, based on filings with the Securities and Exchange Commission, have been excluded since such persons may be deemed affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. As of July 15, 2005, 49,706,461 shares of the registrant’s Common Stock were outstanding. The registrant’s proxy statement relating to the 2005 Annual Meeting of Stockholders, to be filed within 120 days of the end of the fiscal year ended June 3, 2005, is incorporated by reference in Part III of this Form 10-K to the extent stated herein. Palm, Inc. Form 10-K For the Fiscal Year Ended May 31, 2005* Table of Contents Page PART I Item 1. Business ........................................................................................................................................ 4 Item 2. Properties....................................................................................................................................... 12 Item 3. Legal Proceedings ............................................................................................................................ 12 Item 4. Submission of Matters to a Vote of Security Holders .............................................................................. 12 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ....................................................................................................................................... 12 Item 6. Selected Financial Data..................................................................................................................... 13 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.............................. 14 Item 7A. Quantitative and Qualitative Disclosures About Market Risk.................................................................... 42 Item 8. Financial Statements and Supplementary Data....................................................................................... 43 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ............................ 71 Item 9A. Controls and Procedures.................................................................................................................... 71 Item 9B. Other Information ............................................................................................................................ 73 PART III Item 10. Directors and Executive Officers of the Registrant ................................................................................. 73 Item 11. Executive Compensation................................................................................................................... 73 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ............. 73 Item 13. Certain Relationships and Related Transactions..................................................................................... 73 Item 14. Principal Accountant Fees and Services ............................................................................................... 73 PART IV Item 15. Exhibits and Financial Statement Schedule........................................................................................... 74 Signatures ...................................................................................................................................... 78 Schedule II—Valuation and Qualifying Accounts .................................................................................. 79 ____________ * Our fiscal year ends on the Friday nearest May 31. For presentation purposes, the periods have been presented as ending on May 31. 2 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: We may make statements in this Annual Report on Form 10-K, such as statements regarding our plans, objectives, expectations and intentions that are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements generally are identified by the words “ believes,” “ expects,” “ anticipates,” ‘estimates,” “ intends,” “ strategy,” “ plan,” “may,” “will,” “ would” and similar expressions and include, without limitation, statements regarding our intentions, expectations and beliefs regarding mobile computing and communications solutions and the mobile computing and communications market, our leadership position in the mobile computing device market, our ability to grow our business, our corporate strategy, developing market-defining products, capitalizing on industry trends and dynamics, the impact of wireless technology, managing a diversified portfolio of mobile computing products, increasing the adoption of smartphones, the domestic and international market opportunity available to us, market demand for our products, our ability to differentiate our products, attract new customers and drive the upgrade cycle by consumers, competition and our competitive advantages, our ability to build our brand and consumers’ awareness of our products, the resources that we and our competitors devote to development, promotion and sale of products, our expectations regarding our product lines, our ability to broaden and expand our wireless carrier relationships, our ability to cause application providers to provide applications for our products, backlog for our products, seasonality in sales of our products, the adequacy of our properties, facilities and operating leases and our ability to secure additional space, reversal o f our d eferred tax v aluation allowance, ou r net op erating loss carry forwards, our belief that our cash and cash equivalents will be sufficient to satisfy our anticipated cash requirements, dividends, our tax strategy, sales of securities under our universal shelf registration statement and the use of proceeds therefrom, the impact of stock option expensing rules and methods and other accounting pronouncements on our results, our operating results, concentration of our credit risk and legal proceedings by and against us. These statements are subject to risks and uncertainties that could cause actual results and events to differ materi ally. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially fro m s u ch forward-looking statements is included in the section entitled “ Business Environment and Risk Factors” on page 32 herein. We undertake no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Annual Report on Form 10-K. The stockholder communication document accompanying this Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements include, without limitation, statements regarding our goals and objectives, our intentions regarding our future growth and profitability, the prospects for our products, our ability to drive adoption of our smartphone products, our ability to meet demand for our products, the value and perception of our brand, our ability to leverage our brand, our ability to change people’s habits and to make a difference,