Palm Shares Fall By More Than 20 Percent After Bleak Outlook

Shares in PDA pioneer Palm have tumbled by more than 20 percent to less than $4.50 after the latest forecasts and details about the sales of the company's flagship smartphone, Pre, leave observers worried about Palm's very future.

The third quarter of the financial year proved to be particularly difficult for the smaller smartphone company as it failed to provide with a follow up to its critically acclaimed Palm Pre.

The phone, which is already 15 months old, is still Palm's flagship device in a period that saw the arrival of dozens of new smartphones including a significant army of Android-based models.

Palm says that it made a lost of $22 million for the past quarter which is still significantly better than the $98 million it lost in the same quarter in 2009. Investors it seems have lost faith in the company whose market capitalisation is now just over $750 million.

Sales figures are equally dismal. It sold only 408,000 Palm handsets to its customers although nearly a million were shipped to partners which means that Palm needs to sell more than half a million phones somehow. Sales were down by 29 percent compared to the previous quarter of 2009.

We reported a few days ago how O2 had quietly started to sell the Palm Pre on £25 monthly contract, a significant reduction from the original £44 per month. A lack of demand is almost certainly the main reason behind the move.