Palm released its second-quarter earnings and the news looks to be as dire as investors had feared.

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[PALM  Loading...      ()   ] reported $349.6 million in revenue and a 9-cent-per-share loss on the quarter. The consensus was $350 million and an 8-cent-per-share loss. The disappointing news is somewhat surprising since it was just a couple of weeks ago that Palm revised its own guidance lower.

It would appear these numbers today miss even Palm's own internal guidance.

And look no further than the company's smart-phone business for the weakness: Palm says it shipped 686,000 smart phones during the second quarter. Estimates I saw were all north of 700,000 units; Pacific Crest Securities' was at 745,000. We expected the company's unit sales to be light because of the delay of its next generation Treo 755p which only began shipping this week, but the weakness in this sector is taking a number of analysts off guard today.

The story doesn't get better as far as third-quarter guidance is concerned, either: Palm now expects a new revenue range of $310 million to $320 million, when most analysts expected revenue to be flat from whatever the company reported today.

Additionally, there were some optimists out there that had expected, since the Treo 755p had finally begun shipping, that Palm might see a little bit of a revenue upside surprise. Not the case; the red ink will also widen. The company is now expecting a third quarter loss of 14 to 16 cents per share; analysts had expected something closer to 9 or 10 cents.

James Faucette from Pacific Crest Securities says the revenue guidance shortfall may come from the company, not including sales of its new Centro $99 smart phone, as its exclusive arrangement with Sprint expires and the device becomes available on new networks. That's something that will likely come up on the call. If the company is, in fact, including those expected sales of the Centro as it starts to appear on other networks, then yes indeed, he says, this report is as ugly as it looks.

Surprisingly, there was no mention in the company's release about its  widely speculated workforce reduction, which has eliminated anywhere from 10 percent to 25 percent of the company's payroll this past quarter.

Another surprise, at the end of its comments: "The company will suspend specific financial guidance in future quarters, but will continue to provide general business guidance and comments on industry trends." That's never good to read.

Likely topics on the conference call will also include Chief Executive Ed Colligan's future; and, of course, whether new investor Elevation Partners -- now controlling 27% of the company's stock -- has any plans to take the company private. It's far more affordable to do something like that today: Palm shares are getting crushed on this news, down almost 10% on Tuesday, and off 65% this quarter alone.

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