Palm's management argued that it was simply doing the same thing by offering a disappointing near-term outlook. But analysts noted that some of the causes for the disappointing guidance could plague the company longer term.
Palm chalked up the disappointing near-term guidance in part to plans to discontinue sales of its Treo smartphones in Europe due to new environmental regulations there. Meanwhile, the company said that enterprise customers are taking longer than expected to adopt its new smartphone that runs on Microsoft's (MSFT - Get Report) Windows Mobile operating system.
Palm's execution problems were coming at a dangerous time, analysts noted. In the U.S., which is where Palm gets the bulk of its sales, the company's Windows Mobile phone could face strong competition from Motorola's Q phone. And in Europe, Nokia (NOK) and Samsung are ramping up sales of their own smartphones right when Palm won't have anything to offer customers.
"We believe that competitive concerns are likely to linger over Palm for the next several quarters until the company is able to demonstrate that the recent uptick in sell-through is sustainable in the face of increased competition," wrote James Faucette, an analyst with Pacific Crest Securities, in a research note on Friday. Pacific Crest has not done recent investment banking business for Palm.What's interesting is the degree to which those competitive concerns are weighing on Palm rather than RIM, when both companies face threats from the same big players. Competition is clearly an issue for RIM and, because of the stock's volatility, it's not necessarily a great long-term play, acknowledges Fickes. But even with the rise on Friday, the stock is trading at about 22 times current year earnings estimates, giving it a price-to-earnings-to growth