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RPT-UPDATE 2-Palm posts loss as sales of pricier phones slow

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LOS ANGELES, June 26 (Reuters) - Smartphone maker Palm Inc PALM.O on Thursday posted a fourth-quarter loss after a profit a year earlier, as slowing sales of older phones such as the Treo offset strong sales of its new, cheaper Centro phone.

Palm also posted lower-than-expected revenue during the quarter ended May 30, which helped send its shares down more than 3 percent in extended trading.

Palm’s Chief Executive Officer Ed Colligan said on a conference call that he expects revenue to grow in the first quarter, but the company would likely not make a profit as it continues to spend on developing and marketing its various smartphones and wireless devices.

Colligan said Palm’s Centro smartphone, priced at $99 and aimed at first-time users of these devices, was a “tremendous hit.” The Centro, launched last September, also attracted many new customers to the company, he said.

But the Centro's popularity did not translate into higher revenue because it has lower margins than Palm's other phones, which are more expensive. Its flagship Treo phone competes with Apple Inc's AAPL.O iPhone and Research in Motion's RIM.TORIMM.O BlackBerry, but has lost market share to them.

“We’re very pleased with the Centro, even though we knew it was not a growth margin product,” Chief Financial Officer Andy Brown said on the call. “We want to continue to support the Centro momentum.”

NET LOSS, REVENUE SQUEEZED

Net loss for the fourth quarter was $43.4 million, or 40 cents a share, compared with net income of $15.4 million, or 15 cents a share, in the year-ago period.

Excluding items such as stock compensation and charges, Palm lost 22 cents per share, compared with net income of 17 cents per share a year earlier.

Palm’s loss per share was 19 cents based on 123.1 million outstanding shares after a recapitalization. That was one penny deeper than the average analyst estimate of a loss of 18 cents per share, according to Reuters Estimates.

Net fourth-quarter revenue fell to $296 million, from $401 million in the year-ago quarter. That was below analysts’ average estimate of $301 million, according to Reuters Estimates.

Brown attributed the lower revenue to slowing sales of the Treo, which is based on Microsoft’s Windows Mobile operating system, and of other handheld devices.

But he added that Palm expects to strengthen revenue in the first half of 2009 after it introduces new, upgraded Windows-based Treos in the market.

The new Treos, which will be more expensive than existing models but also more sophisticated, will compete well against rival devices such as the iPhone, Palm executives said.

Sunnyvale, Calif.-based Palm’s shares fell 24 cents, or 3.6 percent, to $6.24 in extended trading after closing at $6.54, down 4.4 percent for Thursday’s regular session on Nasdaq. (Additional reporting by Anupreeta Das in San Francisco; Editing by Gary Hill)

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