Palm warns of weak sales amid Pre anticipation

Palm warned on Tuesday that it would have weaker sales in its fiscal third quarter, as demand for existing smartphones in its portfolio dropped in anticipation of the release of its newest product, the Pre.

The smartphone maker said it expected to report revenue between $85 million and $90 million for its fiscal third quarter, well below Wall Street expectations and down from $312.1 million in the year-ago period. Palm also said that it expected revenues to decline in the current quarter. The company reports its fiscal third quarter earnings March 19.  

Palm said it had enough cash to meet its needs--with cash, cash equivalents and short-term investments worth about $215 million--but it was considering other options, including possibly selling stock. 

"The much-anticipated launch of the Palm Pre remains on track for the first half of calendar year 2009, but as expected we've got a difficult transition period to work through," Palm CEO Ed Colligan said in a statement. "Despite the challenging market environment, the extraordinary response to the Palm Pre and the new Palm webOS reaffirms our confidence in the growing smartphone market."

Palm is expected to launch the Pre sometime in the first half of the year. Sprint Nextel will have exclusive carrier rights to the device in the United States. Palm is pinning much of the future of the company on the success of the device, which combines users email inboxes, messaging conversations and contact lists into individual programs.   

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