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Palm lowers smartphone revenue expectations

Cites slower than expected consumer adoption

Despite launching a number of smartphones last year, Palm is predicting that revenues from its relaunched mobile phone business will fall far short of earlier projections.

The smartphone manufacturer said it was now hoping for a fiscal year total of $1.6bn to $1.8bn, which is "well below" the earlier forecast.

Some are already predicting this is the beginning of the end for the device maker.

In a statement, the company said carrier orders were cutting or deferring orders for Palm webOS-based smartphones, such as the Pre Plus and Pixi Plus, in the face of "slower than expected consumer adoption" of the new products.

Revenues will be lower for the current third quarter and for the entire fiscal year, the company said. The original Palm Pre, the first using Palm's well-regarded, innovative webOS, went on sale in October last year.

Stock falls

Palm's stock plunged in response, losing more than 17 percent, to $6.70 (£4.38). It had already taken a hit earlier in the week, in response to critical evaluations from stock analysts.

Vivek Arya, analyst with Bank of America/Merrill Lynch, changed his stock rating from 'buy' to 'underperform', and cut his price target for the company's stock from $20 (£13) to $10 (£6.50).

The stock had reached a high of $17.39 (£11.39) last September. The week began with a stock price of $9.12 (£5.97); by end of day Wednesday, it had dropped even further to $8.07 (£5.28).

Jon Rubinstein, Palm's chairman and CEO said: "Our carrier partners remain committed, and we are working closely with them to increase awareness and drive sales of our differentiated Palm products".

But in his analysis, Arya wrote that the "window of opportunity may be closing" in the face of continued, growing success for Google's Android, Research in Motion, the Apple iPhone, and even Microsoft's re-tooled Windows Phone 7.

Palm has only $130m in net cash to meet extensive, increasing operating expenses, such as new advertising program for the webOS product line. "Palm's options may be limited in our view," he said.

For others, the window has long since been nailed shut.

"If Palm ever had a real window of opportunity - and that is certainly debatable - it is closing rapidly," said David Coursey from PC Advisor's sister magazine PC World, in a blog titled 'Why Palm can't be saved'.

"Let me make this really clear: There is no reason for anyone to purchase a Palm smartphone that makes sense, save a few people who hate Apple, Android, and BlackBerry with equal passion. All three competitors are better choices than a Palm Pre Plus or Pixi Plus," Coursey said.

See also: Palm and Motorola handsets to support Flash 10.1

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