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Palm Shows Strong Hand

Updated from 4:56 p.m. EST

Palm (PALM), boosted by robust smartphone sales, on Thursday reported third-quarter earnings and revenue that surpassed analysts' estimates.

For the quarter ended Feb. 28, excluding items, the maker of the popular Treo earned 19 cents on sales of $388.5 million, compared with 10 cents and revenue of $285.3 million in the year-ago period -- a 36% increase.

On average, analysts polled by Thomson First Call forecast income of 16 cents a share and $374.7 million in revenue.

Investors cheered the news, immediately bidding shares up 7.7% after hours; shares recently traded up $1.07, or 5.3%, to $21.21.

For the current or fourth quarter, the Sunnyvale, Calif., company also topped guidance estimates, seeing non-GAAP EPS of 22 cents to 23 cents vs. analysts' consensus of 20 cents. It forecast revenue of $400 million to $405 million vs. the $397.51 million Street consensus.

Palm said it shipped 564,000 Treo smartphones in the quarter, more than twice the amount in the year-ago period. The company's share of the U.S. smartphone/PDA market also rose to 30%, up from 22% a year ago.

CEO Ed Colligan said that the company's "double-digit, year-over-year revenue growth and profitability" validated Palm's "decision to support multiple open platforms and offer a choice of smartphones based on either Windows Mobile or Palm OS."

In early February, one of the company's leading investors called on Palm's management to explore selling the company , warning of looming competition and commoditization of the smartphone market.

Palm shares closed the regular session ahead 47 cents to $20.14.

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