Updated from Thursday, Sept. 17

SUNNYVALE, Calif., (


) --



goes back to its investors again for cash.

With cash running low and facing heavy costs this quarter with new product launches, Palm says it will offer 16 million new shares to the public, effectively diluting existing shareholders by 11%.

The move doesn't exactly come as a surprise, as Palm's cash position and rising share price made the fundraising decision fairly clear. Palm needs to spend heavily to get its phones out in time to compete with rivals like


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during the holidays.

The rejuvenated smartphone pioneer did manage to trim more costs from its business. Palm posted an adjusted loss excluding one-time items of a dime, a smaller loss than the 40 cents in the May quarter and the 39-cent pro forma loss a year ago. The dime loss was much less than the 24 cents analysts expected, according to Yahoo! Finance.

Sales for Palm's fiscal first quarter ended last month were $360.7 million, up from the $113 million in the prior quarter but down from the $367 million level last year. Analysts were looking for sales of $298 million.

"We're making significant progress with Palm's transformation," CEO Jon Rubenstein said in a press release. "We're launching more great Palm webOS products with more carriers, and turning our sights toward growth," he added, referring to the Pixi phone.

Palm Pixi

Looking ahead, Palm warned that the timing and scale of new product launches and low demand for older phones will drag down its fiscal second-quarter adjusted sales to a range between $240 million to $270 million. That midpoint of $255 million is well below analysts' estimates of $344.3 million, according to Yahoo! Finance.

But for the full fiscal year ending in May, Palm raised its target above estimates and called for total sales of $1.7 billion.

During its fiscal first quarter, Palm burned through $45 million, pulling its cash supply down to $110 million from the $152.4 million available in the prior quarter.

Palm shares closed Thursday down 22 cents, or 1.5%, to $14.44. It fell a further 43 cents, or 3%, in after-hours trading to $14.01.


Written by Scott Moritz in New York