Palm Slapped on Weak Guidance

For its first quarter, Palm predicted earnings of 13 cents to 14 cents a share -- 18 cents to 19 cents a share excluding options costs -- on sales of between $380 million and $385 million.

In contrast, the Street had previously forecast earnings for the quarter of 22 cents a share excluding options expenses on $413.4 million in sales.

In the first quarter last year, Palm earned $18.2 million, or about 18 cents per split-adjusted share, on sales of $342.2 million.

Palm is discontinuing sales of its Treo 650 model in Europe because of new environmental regulations there, Colligan said, explaining why the current quarter's results will likely fall shy of the Street's estimates.

While the company plans to replace the 650, the only model it sells in Europe, with a new Treo smartphone, it won't introduce that phone until an undisclosed time later this year, the CEO said.

In addition to the sales gap in Europe, the company is seeing slower-than-expected sales of its Treo 700w, Colligan said.

Although Palm launched the model at the beginning of this year, many corporations didn't begin testing it until push email software became available for the device in April, Colligan said on a conference call.

He said that enterprises typically take three to six months to test out equipment before deciding whether to purchase it, implying that sales may pick up this fall.

"We're confident our strategy is sound and that we'll see trials turn into sales in the near future," Colligan said on the call. "It's prudent to set reasonable guidance that we can meet," he later told TheStreet.com.

Palm appears to be more optimistic about the full year. The company did not give specific earnings guidance for the full year.