RIM, PalmOne Square Off

Shares of Research in Motion and PalmOne headed in opposite directions Thursday after the two handheld market leaders reported quarterly results.

RIMM shares fell on concerns about falling margins and slowing subscriber growth after the company reported results that were largely in line with Wall Street expectations.

Shares of PalmOne, meanwhile, were up 8% at one point after solidly trouncing analysts’ expectations, as the company turned around Treo smartphone sales and gained on RIMM in the corporate market.

That said, any differences between the two on Thursday may have been as much about expectations and valuation as performance.

PalmOne trades at 24 times earnings and posted 26% sales growth in the quarter. RIMM, meanwhile, trades at 68 times earnings and grew sales 68% in the quarter. On a one-year forward basis, RIMM trades at 21 times estimates, while PalmOne trades at 17 times estimates.

In short, while RIMM may merit the higher valuation of the two, it also faces higher expectations, and in-line results just weren’t enough for Wall Street’s liking.

Stocks tumbled Thursday after the Federal Reserve raised short-term interest rates for the ninth time in a year and suggested that no end to the rate hikes was in sight.

The Nasdaq lost 11 to 2056, the S&P fell 8 to 1191, and the Dow tumbled 99 to 10,274. Volume rose to 2.08 billion shares on the NYSE, and 1.78 billion on the Nasdaq. Decliners led 17-15 on the NYSE, and 17-13 on the Nasdaq. Downside volume was 68% on the NYSE, and 72% on the Nasdaq. New highs-new lows were 211-32 on the NYSE, and 119-34 on the Nasdaq.

After the close, Red Hat beat earnings estimates and met revenue estimates.

During the day, 3Com , PalmSource and Harmonic fell on their results, while BMC rose 3% after raising guidance.

CA slipped on more accounting woes.

CNET jumped 10% on reports that the company is looking for a buyer.

Register.com climbed 4.6% on reports that Internet billionaire Mark Cuban had acquired a 9.1% stake in the company.

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