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Palm Inc. reported a sharp drop in fiscal Q2 profits and revenues after yesterday's close, while beating Street projections. Its Q3 forecast fell short of analyst expectations. Profits were $0.12/share ($12.8m), compared with $0.17/share in Q2 2006 (after discounting a one-time tax-related gain). Revenues were down 12% to $390m. Despite the drop in profits, Treo unit sales came in at a record high of 617,000, up 42% y/y. Palm said the much lamented delay of Palm Chart 20 12 06its Treo 750 was due to carrier certification issues out of its control. But in its earnings conference call CEO Ed Colligan candidly told UBS's Maynard Um, "If we had gotten [the 750] out a little earlier for the holiday season, I think this quarter would have been significantly better and we would be much more excited about the results... The sell-through y/y was up 42%, so you can imagine what that number would have been if we put that one on the market. Look, no excuses there, we have to do better and we have to hit those dates." He said the 750 U.S. launch remains on track for the current quarter and would boost sales, and admitted that the onslaught of new competition (from rivals like Motorola, Nokia, and Samsung) hurt its numbers. For fiscal Q3 Palm said it expects revenues of $400-$410m and with earnings of $0.08-$0.10/share. Shares dropped to a new 52-week low of $13.41 before closing at $13.70 (-$0.30), and fell 9 cents in after-hours trading following the report.
• Sources: Palm Inc. Fiscal Q2 2007 Earnings Conference Call Transcript, CBS/AP, MarketWatch
• Related commentary: Palm Meets Reduced Guidance; Outlook Weaker Than Expected, Palm Treo 750 Delays May Be Worse Than Expected, Palm Slaps Investors in the Face - Shares Respond in Kind, Palm's Warning, Delay May Increase Its Takeover Likelihood, Palm Warns - Stock Down 4% After Hours, Palm: A Gift for Value Investors
• Potentially impacted stocks and ETFs: Palm Inc. (PALM). Competitors: Motorola Inc. (MOT), Nokia Corp. (NOK), Research In Motion Ltd. (RIMM)

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Source: Palm Earnings Drop on Treo Delay, Onslaught of Competition