Palm Slapped on Weak Guidance

Updated from June 29

Palm got slapped Friday after the Treo smartphone maker predicted disappointing first-quarter results.

Earnings for the current period will likely be at least 3 cents a share less than what analysts expected, the company said Thursday. Revenue is likely to fall shy of consensus estimates by about $30 million, Palm said.

The shortfall is due to "transition" issues, said company CEO Ed Colligan in an interview with TheStreet.com. The company will experience a sales gap in Europe later this month due to new environmental regulations there, he said.

Meanwhile enterprise sales of the company's Windows Mobile smartphone, the Treo 700w, are taking longer than expected to complete, he said. "We see both those things being resolved" shortly, Colligan added.

Indeed, the company forecast better-than-expected results for its full year.

But the full-year outlook didn't assuage investors. In early Friday trading, shares of Palm were off $2.40, or 12.9%, to $16.26.

The share price plunge also came despite the company's blowout fourth quarter. In the period ended May 31, Palm earned $27.2 million, or 25 cents a share, which was up 53% from the year-ago quarter when the company posted a profit of $17.7 million, or 17 cents a share, a year earlier.

The company's sales jumped 20% year-over-year to $403.1 million, boosted by revenue from its Treo smartphones.

Excluding stock-options costs and certain other charges, the company would have earned $30.6 million, or 29 cents a share, up from $19.2 million, or 19 cents a share, in the year-ago quarter.

On this basis, analysts polled by Thomson First Call were expecting the company to earn 23 cents a share on sales of $401.7 million. In March, the company predicted pro forma earnings for the just-completed quarter of 22 cents to 23 cents a share on sales ranging from $400 million to $405 million.