Page last updated at 10:50 GMT, Friday, 19 March 2010

Palm hit by disappointing smartphone sales

Palm Pre handset
The Palm Pre: large numbers of these are sitting on retailers' shelves

Handheld computer maker Palm has said its income for the year will be far below expectations because of lukewarm sales of its smartphones.

Figures for the third quarter of the year show it shipped almost one million sets, but just over 400,000 actually ended up in customers' hands.

The company had expected to shift 600,000 models.

Palm shares fell 14% after the results were released. The company has now lost nearly half its value in 2010.

Losing battle

It reported a net loss of $22m (£14m) for the third quarter, an improvement on last year's $98m.

But the company is being increasingly viewed as the loser in the battle with its competitors, chiefly Apple's iPhone and Research in Motion's Blackberry.

"The window is closing, there's no question. They've got cash burn going against them and they've got competition going against them," said analyst Matt Thornton at Avian Securities.

Palm has struggled to generate interest in its Pre and Pixi smartphones and has been further pressed by the entry of a new competitor in the form of Google's Nexus One.

Possible takeover

Company executives told analysts that the sluggish sales meant revenue in the fourth quarter would be less than $150m, compared with the $305m that had been expected.

But Palm's chief executive Jon Rubenstein said that the company had a good future.

"Our recent underperformance has been extremely disappointing, but the potential for Palm remains strong," he said.

There has been talk for months that the company will end up being taken over by one of a number of major companies, including Microsoft and Dell.

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