PalmSource, Inc.(TM) (NASDAQ:PSRC) provider of Palm OS(TM), a leading operating system powering next generation mobile devices and smartphones, today reported revenues of $17.6 million for the fourth quarter ended May 28, 2004, as compared to revenues of $17.3 million for the same period of the prior fiscal year. Revenues for the fiscal year ended May 28, 2004 were $73.1 million, compared to revenues of $73.4 million for the prior fiscal year.

Net loss for the fourth quarter of fiscal year 2004 was $2.9 million, or $0.23 loss per share. Net loss for the same quarter of the prior fiscal year was $3.4 million, or $0.34 loss per share. Net loss for the fiscal year ended May 28, 2004 was $15.2 million, or $1.40 loss per share, as compared to a net loss of $21.8 million, or $2.18 loss per share, for the prior fiscal year.

At May 28, 2004, cash, cash equivalents, restricted investments, short- term and long-term investments were $88.6 million. Cash utilized for operating activities during the fourth quarter of fiscal year 2004 was $3.1 million.

On a non-GAAP basis that excludes the effect of stock-based compensation, amortization of intangible assets, restructuring, and/or separation expenses (related to the spin-off of PalmSource from palmOne) net loss for the fourth quarter of fiscal year 2004 was $0.6 million, or $0.05 loss per share. This compares to a non-GAAP net loss for the same quarter of the prior fiscal year of $0.6 million, or $0.06 loss per share. Non-GAAP net income for the fiscal year ended May 28, 2004 was $1.2 million, or $0.10 earnings per share, as compared to a non-GAAP net loss of $11.7 million, or $1.17 loss per share for the prior fiscal year.

Fourth Quarter 2004 Highlights

* PalmSource completed a stock offering of 3.45 million shares,
resulting in net proceeds of approximately $58.7 million.
* PalmSource entered into a technology distribution agreement with
Research In Motion (RIM) that permits RIM to license a BlackBerry
Connect offering to Palm OS licensees. Together, BlackBerry Connect
and Palm OS will extend email and corporate data connectivity to
Palm Powered(TM) smart mobile devices.
* Palm OS licensees reported shipments of 1.4 million Palm Powered
units, of which 78% were handheld devices, 18% were smartphone
devices and 4% were other devices. In the same quarter of the prior
fiscal year, Palm OS licensees reported shipments of 1.5 million
Palm Powered units, of which 88% were handheld devices, 10% were
smartphone devices and 2% were other devices.

Business Outlook

Management's current outlook for the first quarter of fiscal year 2005 is as follows:


* Revenues are expected to be in the range of $18 million, plus or
minus 5%.
* Financial results on a GAAP basis are expected to be in the range of
a net loss of $2 million, or $0.14 loss per share, to breakeven
(including a $1.9 million benefit resulting from prepayment of the
Texas Instruments convertible note at a discount); and on a non-GAAP
basis, are expected to be in the range of a net loss of $2 million,
or $0.14 loss per share, to breakeven. The difference between our
financial results on a GAAP basis and a non-GAAP basis is expected
to be primarily the result of the benefit resulting from the
prepayment of the Texas Instruments convertible note, charges for
stock based compensation, and restructuring costs that may be
incurred.

PalmSource Analyst /Investor Conference Call

INVESTOR'S NOTE: The company will hold a conference call for the public on June 24, 2004, at 2 p.m. Pacific Daylight Time/5 p.m. Eastern Daylight Time to discuss matters covered in this press release. The live conference call will be available over the Internet by logging onto the investor relations section of PalmSource's website at http://www.palmsource.com/about/ir.html . An audio replay of the conference call also can be accessed at the same URL beginning on June 24, 2004 no later than 4 p.m. Pacific / 7 p.m. Eastern. The webcast is also being distributed over CCBN's Investor Distribution Network to both institutional and individual investors through CCBN's individual investor center at www.companyboardroom.com, by visiting any of the investor sites in CCBN's Individual Investor Network or via CCBN's password-protected event management site, StreetEvents (www.streetevents.com). This press release will be furnished on a Form 8-K and posted on our website prior to the investor conference call.