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Palm Shares Skid on Weak Earnings Report

Palm Centro
Achille Bigliardi
Palm Centro

Palm, which blazed a trail with its Treo smart phone, is painting a disappointing quarterly outlook -- and urging investors to be patient as it strives to regain strong growth, even as rivals' stock prices reach trading highs amid their own robust sales.

For now, however, investors do not appear enthused: The handheld-device firm posted a first-quarter loss after market close Monday, and its shares dropped nearly 5 percent.

And on Tuesday, Palm shares trading on the Nasdaq lost 73 cents, or 4.56 percent, at $15.27.

In its first earnings report since it sold a 25% stake to private equity firm Elevation Partners, Palm said Treo sales were hurt by Apple'siPhone and other devices. The company also lowered guidance for the current quarter.

By comparison, BlackBerry maker Research in Motion has seen its stock more than double in price this year. And analysts expect a far rosier picture than Palm's, when RIM reports quarterly results Thursday.

Apple, which entered the smart phone market June 29 with its ballyhooed iPhone, saw its stock hit an all-time peak Monday, trading as high as $157.41 before closing at $156.34.

The trendsetting maker of iPods and Macintosh computers announced last month that it had sold more than 1 million iPhones within 74 days of the product's debut.

Looking ahead, Palm said it expects second-quarter earnings in a range of 6 to 8 cents a share on revenue of $370 million to $380 million, which tracks below current consensus estimates of 10 cents a share in earnings on sales of $407 million.

During the quarter, the company announced a strategic relationship with Elevation Partners, which would invest $325 million in the company for a 25% ownership stake, resulting in a special $9 per share dividend for existing shareholders.

Attempting to play catch-up with its rivals, Palm last week unveiled a thinner and more affordable smart phone. The Centro, Palm's first major hardware redesign in years, will cost $99 with a two-year service contract when it becomes available later this month.

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