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After reaching nearly $25 in early April, the stock price of Palm (Nasdaq: PALM) has been in free-fall mode. Ahead of its earnings report, the stock was down 7% to $14.50. But, in after hours trading, Palm shares gained some ground.

In the prior quarter, revenues were $355.8 million, which was a 4% increase compared to the same period a year ago. Wall Street analysts had a forecast of $354.4 million.

Earnings came in at $16.5 million, or $0.16 per share, up from last year's $18.2 million or $0.18 per share. But, excluding non-cash items (such as stock options expenses), the company earned $21.5 million or $0.21 per share. This also beat the Street estimate of $0.18 per share.

The outlook was not as optimistic. The company expects revenue for the next quarter to range between $430 million to $450 million, which compares to the Street’s estimate of $472 million. Palm thinks pro-forma earnings will be between $0.20 to $0.23 per share, whereas the Street had an estimate of $0.28 per share.

Full year guidance? Well, the company did not reaffirm it. Again, this is another trouble sign. In fact, Palm is going to push for market share gains for the rest of the year – not profitability.

Basically, it looks like Wall Street baked in the right valuation for the stock.

On a go forward basis, there could be some traction in the stock – given the upcoming Christmas season. But, it certainly looks like the company’s fierce competitors – such as Motorola (NYSE: MOT), Nokia (NYSE: NOK) and Research In Motion (Nasdaq: RIMM) – are taking a toll.

Related: Palm F1Q07 (Qtr End 9/1/06) Earnings Conference Call Transcript

Source: Palm: Getting Squeezed by Its Competitors