Handspring Takes a Tumble as Handheld Sales Fall Flat

Updated from 5:32 p.m. EDT

Handspring (HAND Quote) is playing demolition derby with its fourth-quarter numbers. The No. 2 handheld maker rear-ended market leader Palm (PALM Quote) after the close of trading Thursday, taking $70 million, or up to 54%, off its fourth-quarter revenue estimates in the great Palm inventory smash-up.

Handspring expects to post $60 million to $65 million in revenue for the quarter ending June 30, a little more than half its previous guidance of $130 million and a demolished finish in comparison to the third quarter's $123.8 million in revenues. On a conference call following the warning, CEO Donna Dubinsky blamed the revenue woes on a trifecta of slowing handheld market growth, price competition and the disappointing performance of its high-end products. Prior to the warning, the Street expected Handspring to drum up $121.47 million in revenue, as reported by Multex.com.

"This is disastrous given they've still got Father's Day ahead of them. This quarter is backend-loaded, which speaks to how bad things are right now," says Matt Adams of Epoch Partners, who calculates that the company could have sold as little as $20 million to $30 million with a few weeks to go until quarter's end. His firm has done no investment banking for Handspring. ...