Palm warns of lacklustre demand

Shares in Palm fell by 14 per cent in after-hours trading on Thursday after the smartphone manufacturer issued another warning and said that revenues in the current quarter would again miss analysts’ estimates because of lacklustre demand for its latest products.

Palm’s stock has fallen 40 percent since the start of 2010. Taking into account Thursday’s after-hours losses that took the stock down to $4.86, Palm has lost half its value since the year began and is now trading back around the levels seen before the launch last year of the Palm Pre smartphone.

Palm’s senior executives told analysts on a conference call that its fiscal fourth-quarter revenue will be less than $150m – about half what analysts had been expecting. Palm said the revenue shortfall reflected the impact of high inventory levels of its Palm Pre and Palm Pixi smartphone products at Sprint Nextel and Verizon, its two main US mobile network operator partners.

”Our recent underperformance has been extremely disappointing to me personally,” Jon Rubinstein, chief executive, said on the conference call.

Palm, which just last month warned that its third quarter revenues would miss analysts’ estimates, shipped a total of 960,000 smartphones in the latest quarter but said sell-through – which reflects how many devices are actually sold to consumers – totalled 408,000 units, lagging the 600,000 units or more many analysts expected.

Palm’s net loss of $22m, or 13 cents a share, in the third quarter compares with a year-ago loss of $98m, or 89 cents a share. Excluding certain items, the company’s loss was 61 cents a share. Revenues of $349.9m were slightly above the company’s reduced estimate of $300m to $320m.

Palm, which helped pioneer the smartphone market with its family of Treo handsets, has bet its future on the success of its Palm Pre and Palm Pixi smartphones, which are powered by its new WebOS operating system.

While the Palm Pre, first launched last summer with Sprint Nextel, the third largest US network operator, was widely praised by reviewers, it and the smaller Palm Pixi have failed to attract consumers in the face of fierce competition from rivals including Apple, Research in Motion, HTC and Motorola.