What's going on is that Palm is now predicting their fiscal fourth quarter will have revenues of $300 to $315 million, which is somewhat less than last year's fiscal fourth quarter revenues of $350 million. First off, let's explain that companies often operate on fiscal years, which is literally the financial year. While you and I know the year begins in January, companies often decide to begin their accounting (or fiscal) years on some other month. Palm's fiscal fourth quarter ends in June, so they begin their fiscal year in July.

Basically, the company is predicting that due to "effects of the deteriorating macro economic environment," they're going to sell fewer devices and make less money during the upcoming quarter. Given that they've also announced a new series of products (the Palm m500 and Palm m505) which aren't yet shipping, there's some expectation of a ramp-up time for production of the new models.

Because of all this, Palm has issued this statement:

Palm is adjusting its business model and focusing on balance-sheet management to ensure it emerges a stronger company when economic conditions improve. The company plans to reduce its work force by approximately 250 employees and contract workers. In addition, the company is postponing construction of its new corporate headquarters in San Jose, Calif., which was scheduled to begin this month, and is re-evaluating its real estate needs and strategy with the goal of reducing or eliminating cash requirements associated with real estate.

Overall, it sounds like a pretty sound business decision. That's not to say it's ever good to see layoffs. When I wrote my book, The Flexible Enterprise, back in 1994 (right after the last Bush recession), I came out pretty strongly against layoffs. I still believe layoffs are unfortunate and that companies would often do much better to reorient employees to other tasks.

I often compare running a company to captaining a ship at sea. One thing I've learned above all others is that the ship must come first. If the ship sinks, everyone sinks. Keeping the ship in good health comes before any of the crew or passengers.

We know a whole lot of people over at Palm, and we have become quite fond of them. I'm certainly hoping that none of these incredibly cool people disappear. But while I'm not a proponent of layoffs, it does seem as though Palm's management is making prudent business decisions, carefully plotting the course that will keep the ship sailing in the right direction.

Before I go on, I'd like to pass on my best wishes to both those employees staying at Palm, Inc., and those who will be looking for new employment.

What's going on with the economy
And now, let's go on to this economy thing. The economy is a fickle, fickle beast. It'll turn on you in an instant, but usually not without a little prodding.

There's no question our economy has taken its share of lumps in the past few months, and we've definitely been prodding it into turning on us. First, of course, there was the dot-com debacle. Tons of people were investing huge amounts of money in businesses with no business being in business. You know most of the stories. The thing is, investors were blinded by greed. Back in the eighties, when I worked at an early venture-funded startup, you were expected to build a nice $50 or $100 million company with a $5 or $10 million investment. If you could really make a business case that you'd actually get to 50 mil or so, and if you had the right management team, you could get the cash to start your company. And many did.