Palm Continues Downward Spiral

Things just aren’t getting any brighter for Palm.

The struggling mobile device maker said revenue for the second quarter of its fiscal 2009 will come in way below analysts’ expectations of $299 million to $363.4 million, according to Reuters Estimates. Instead, it will hit somewhere between $190 million and $195 million.

Palm (NASDAQ: PALM), which announced layoffs last week, cited the shaky global economy as the main culprit.

“We are seeing unprecedented dynamics in the global markets as economic uncertainty hampers demand for consumer products,” Ed Colligan, Palm’s president and CEO, said in a statement.

“In order to ensure Palm’s long-term success during these uncertain times, we’re taking several steps to significantly reduce our cost structure,” he added. “These measures will help us navigate this difficult period while launching our next-generation products as planned.”

The measures include consolidating operations abroad and moving oversight of its Asia-Pacific business to U.S.-based operations.

According to a statement, the company expects the actions to reduce operating expenses in its fiscal fourth quarter by about $20 million, compared to its first-quarter 2009 levels. Palm reports its next financial results on Dec. 18.

A Palm spokesperson declined further comment today to

Following the announcement, made public after trading closed on Monday, shares of Palm stock opened at $1.40, down from yesterday’s close at $1.88. Shares were trading up 7.5 percent at press time, at $2.02.

The Yahoo Palm stock message board offered up a mixed bag of investor feedback today, ranging from a call to fire Colligan to stalwarts pledging to remain steadfast, at least for now.

Part of that confidence may hinge on a number of well-received product announcements.

Palm’s share price hit its 52-week high of $8.94 on Sept. 2, about two weeks after it debuted its latest smartphone, the Treo Pro. The $549 device, which is sold “unlocked” — that is, it’s not linked to a particular wireless carrier’s network — received good product reviews.

Just weeks earlier, Palm had also pushed out its Treo 800w smartphone, which came on the heels of Apple’s launch of its popular 3G iPhone.

But the product debuts haven’t helped reverse the financial tide for the 16-year-old company.

Once revered as an innovator in mobile devices and a leader in the Personal Digital Assistant market, Palm currently ranks in third place in the smartphone market, according to IDC — with an 8.5 percent share that puts it behind Research in Motion and Apple, as of third quarter. That’s also down sharply from the 13.16 percent market share IDC said Palm held during the first quarter of 2008.

A quick glimpse at current quarterly revenue growth, on a year-to-year comparison, further illustrates how Palm has fallen behind its rivals. RIM enjoyed an increase of 87.80 percent during its most recent financial quarter, while Apple reaped 27 percent. Meanwhile, Palm reported just 1.7 percent growth.

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