February 25, 2010 / 1:58 PM / 9 years ago

Palm cuts revenue view on weak phone sales

NEW YORK (Reuters) - Palm Inc PALM.O slashed its fiscal third-quarter and full-year revenue target due to slow consumer demand for its products, dashing hopes its webOS software would help it fend off bigger rivals for now.

Palm shares fell 18 percent on Thursday after it said it expected quarterly revenue of $300 million to $320 million on a non-GAAP basis, well below the analysts’ average estimate of $424.7 million, according to Thomson Reuters I/B/E/S.

It blamed slower-than-expected consumer adoption of its products, leading to weaker-than-expected orders from operators and the deferral of orders to future periods.

As a result, it said full-year results would be “well below” its own target range of $1.6 billion to $1.8 billion. Wall Street was expecting full-year revenue of $1.6 billion, according to Thomson Reuters I/B/E/S.

The warning followed downgrades earlier this week from at least two brokerages on concerns about sales of Palm phones at Verizon Wireless, the biggest U.S. mobile operator and a venture of Verizon Communications(VZ.N) and Vodafone Group Plc (VOD.L).

Palm is betting on its new webOS software to help its phones compete more effectively against rivals such as Apple Inc’s (AAPL.O) iPhone and BlackBerry from Research in Motion RIM.TO.

However, after a very high-profile launch last summer of Pre, the company’s first webOS phone, the device was hurt by supply constraints and stiff competition.

Earlier this year, Verizon Wireless became the second U.S. provider to sell the Palm phones, which were exclusive to customer-losing provider Sprint Nextel (S.N) last year.

Palm Chief Executive Officer Jon Rubinstein said the company was working closely with carrier partners to increase awareness of its products and drive sales.

“However, driving broad consumer adoption of Palm products is taking longer than we anticipated,” the executive said in a statement announcing the revenue outlook.

Palm shares fell 18 percent to $6.63 in early Nasdaq trading.

Reporting by Sinead Carew; Editing by Lisa Von Ahn

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