Palm Shares Plummet As Sales, Forecast Disappoint

Palm just can't seem to catch a break, even as its Pre and Pixi phones have garnered good reviews. The beleaguered mobile device maker watched its stock nosedive after hours Thursday and in early U.S. trading Friday, following the release of quarterly earnings and sales forecasts for Palm phones that were less than half of what many analysts were expecting.

According to Palm, revenue for its next quarter, ending May 31, is expected to be less than $150 million. That's according to Palm CFO Doug Jeffries, who noted the figure -- less than half of the $305 million range most of Wall Street was predicting, according to Bloomberg -- on Palm's third-quarter earnings call Thursday.

For the quarter ended in February, Palm reported an adjusted loss of $102.8 million, or 61 cents per share, far worse than the 42 cents-per-share most predictions held. Revenue was higher than Wall Street predictions: $366 million, with most firms predicting $316.2 million.

The loss, however, means Palm's streak of quarterly losses also continues unabated. The current quarter's drop brings that streak to 11.

Palm Chairman and CEO Jon Rubinstein expressed disappointment during the conference call but urged Palm supporters to stay optimistic.

"Our recent underperformance has been very disappointing, but the potential for Palm remains strong," Rubinstein said in a statement. "The work we're doing to improve sales is having an impact, we're making great progress on future products, and we're looking forward to upcoming launches with new carrier partners.

"Most importantly," he continued, "we have built a unique and highly differentiated platform in webOS, which will provide us with a considerable -- and growing -- advantage as we move forward."

WebOS is Palm's proprietary smartphone platform, and as Rubinstein noted on the call, many of Palm's webOS phones, including its flagship Palm and Pixi, both released last year, have been favorably reviewed. Earlier this year, Palm released new versions of the two phones, dubbed Palm Pre Plus and Palm Pixi Plus, on Verizon. The Pre Plus, especially, has earned glowing reviews, including from CRN Test Center Managing Editor Ed Moltzen.

Palm has struggled to eat into the hypercompetitive smartphone marketplace, and its share of the U.S. smartphone market has actually declined in recent months, according to market researcher ComScore. Some of ComScore's most recent data, for U.S. smartphone share through the end of January 2010, has Palm at a 5.7 percent share -- down from 7.8 percent just three months earlier -- and other smartphone platforms, such as Google Android, making dramatic gains.

According to Rubinstein, Palm will make changes in how it trains store employees as it works to energize Palm Pre and Pixi sales. Rubinstein described Palm's training efforts as "insufficient."

Some analysts aren't convinced Palm has what it takes to revive. Matthew Thornton, an analyst with Avian Securities, suggested to BusinessWeek Friday that Palm has "one more shot to get it right" on branding.

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