Palm's Shares Plummet On Slow Smartphone Sales Despite Industry Growth

Palm on Thursday updated its financial guidance for its third fiscal quarter by slashing its revenue expectations for the quarter and the year due to a slower-than-expected adoption of its products, particularly its webOS operating system.

Palm dropped its GAAP revenue expectations for its third fiscal quarter to a range of $285 million to $310 million. Street consensus, according to Barrons, had been for revenue to be $424.7 million.

Palm also said it expects fiscal 2010 revenue to be well below its previous forecasts of between $1.6 billion and $1.8 billion.

Investors punished Palm soundly for the news, pushing the company's share prices off a cliff with a plunge of nearly 13 percent to $7.05 per share near the end of the trading day.

It is turning out to be a tough year for Palm.

Gartner earlier this week reported that only 1.2 million smartphones featuring Palm's WebOS operating system shipped in 2009. WebOS first became available in June of 2009 with the release of the company's Palm Pre smartphone.

The low sales of WebOS-based smartphones put Palm at number seven on the list of top vendors. This was well behind the 80.9 million smartphones based on the Symbian operating system, the 34.3 million units based on Research In Motion, and the 24.8 million units based on the Apple iPhone OS, according to Gartner.

The slow WebOS-based smartphone sales also happened despite 2009 being a good year for smartphone sales in general. Gartner estimated that total smartphone shipments in 2009 hit 172.3 million units, up 23 percent from the 139.3 million units shipped in 2008.

Palm plans to release its full fiscal third quarter financial results on March 18.

Jon Rubinstein, chairman and CEO of Palm, said in a statement that driving broad consumer adoption of Palm products is taking longer than the company anticipated.

"Our carrier partners remain committed, and we are working closely with them to increase awareness and drive sales of our differentiated Palm products," Rubinstein said.

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