Palm’s 2nd-quarter loss and weaker smart phone sales disappoint investors, shares slide

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Palm posts wider than expected 2Q loss

SUNNYVALE, Calif. — Smart phone maker Palm Inc. on Thursday posted a wider-than-expected loss for its fiscal second quarter as sales of smart phones declined, sending shares tumbling more than 6 percent in after-hours trading.

For the quarter ended Nov. 30, Palm reported losses after paying preferred dividends of $85.4 million, or 54 cents per share, compared with a year-earlier loss of $508.6 million, or $4.64 per share. Last year’s results included a charge of $396.7 million to write down the value of assets.

Revenue slid 59 percent to $78.1 million from $191.6 million a year ago.

Analysts were expecting a much smaller loss of 32 cents per share on revenue of $266.2 million. Palm shares fell 27 cents, or 2.3 percent, to $11.50 in after-hours trading.

Palm shipped 783,000 smart phones during the quarter, up 41 percent year-over-year thanks to the company’s new webOS phones but down 5 percent from the first quarter. Phones actually sold slid to 573,000, down 4 percent year-over-year and 29 percent sequentially.

Palm, whose business had been struggling amid competition in the smart phone market from BlackBerry maker Research in Motion Ltd. and Apple Inc.’s iPhone, revamped its product line with the Pre’s launch in June. And it is launching a lighter, cheaper handset called the Pixi for the holidays.

“We’re still in the early stages of a long race, and we’re energized by the opportunity to compete in this exciting market,” Palm Chairman and CEO Jon Rubinstein said in a statement. “We remain confident that Palm’s innovative product design capabilities, integrated cloud services and the differentiated and delightful Palm webOS experience will provide the foundation for our sustained success.”

Meanwhile, Research In Motion surprised Wall Street on Thursday as it reported a 59 percent increase in third-quarter income, boosted by new subscribers and record sales of its smart phones.

More than 80 percent of the Canadian company’s new subscribers were non-corporate customers, a sign of the BlackBerry’s popularity among consumers amid intense competition from devices such as Apple’s iPhone, Palm’s Pre and Motorola’s Droid.