Palm Guides to Q2 Loss; Shares Plunge After Hours

Palm, Inc. (PALM) shares plunged 18.8% to $5.35 in extended trading Thursday after the company said it expects to swing to a loss in fiscal Q2 on a sales shortfall. The manufacturer of the Treo smartphone said it expects an adjusted net loss per share of $0.08-0.10 and cut its Q2 revenue guidance to $345-350 million from an already lowered $370-380 million. Analysts had been forecasting a profit of $0.04 per share for the quarter on revenue of $378.2 million. The company attributes the disappointing sales estimate to unspecified product delays and "an unforeseen increase in warranty repair expenses." "We are disappointed that we did not get a key product certified for delivery in the quarter, but we are focused on realizing the long-term benefits and opportunities," said CEO Ed Colligan. Palm's Treo has been overtaken in the market by smartphones from Apple (AAPL), Nokia (NOK) and Research in Motion (RIMM). "There have been market share losses for Palm and this increases the concerns," said Oppenheimer analyst Lawrence Harris. "We do need to see replacements for the traditional Treo line." This is the company's second consecutive loss since LBO firm Elevation Partners took a 25% stake in June. Palm will report fiscal Q2 results on December 18.

Sources: Press release, Bloomberg, Wall Street Journal, AP, TheStreet.com, Forbes
Additional Reading: Palm, RIM and the Red Hot Smartphone Market

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