June 26, 2009 12:53 am

Palm puts its faith in WebOS and Pre

Shares in Palm jumped by about 7 per cent in afterhours trading on Thursday after the struggling US-based smartphone maker reported better-than-expected fiscal fourth-quarter sales and a smaller-than-expected loss.

Palm, which is betting its future on its new Palm Pre smartphone and WebOS operating system both launched last month, reported a net loss of $105m, or 78 cents a share for the three months to May 31 compared with $43.4m, or 40 cents, a year earlier.

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Palm launched the Pre and WebOS on June 6 to challenge Apple’s growing smartphone market share in the US fuelled by the success of the iPhone and help restore Palm’s profitability after two years of losses.

The pebble-shaped touch-screen device, which has a slide-out keyboard, has received a positive response from reviewers and early buyers in the US where it will be available exclusively until the end of the year on Sprint Nextel’s network.

Palm has struggled to keep up with demand for the new handset, which now faces competition from Apple’s updated iPhone 3GS model and a new BlackBerry device due out later this summer.

“The launch of Palm WebOS and Palm Pre was a major milestone in Palm’s transformation; we have now officially re-entered the race,” said Jon Rubinstein, Palm’s chairman, who has also taken over as chief executive. “We have more to accomplish, but the groundwork is laid for a very promising future.”

Revenues in the latest quarter fell by 71 per cent to $86.8m reflecting slowing sales of its ageing line of Treo smartphones.

Nevertheless, the sales figures and net loss was better than Wall Street analysts had feared. The company’s shares, which have quadrupled this year in anticipation of the launch of the Pre, closed at $14.02 on the Nasdaq Stock Market and were up to $16.07 in extended trading.

The company shipped a total of 351,000 smartphones during the quarter, down
62 per cent over the year-earlier period, but a 6 per cent increase from the fiscal third quarter.

Smartphone sales are one of the few segments of the mobile phone market that have continued to grow.

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