As we reach ahead into this week, fumbling for a grasp on Palm's (NASDAQ:PALM) 2008 second-quarter earnings news, the company extends us a hand, cold and clammy as though from the grave. Little wonder that investors view Palm's earnings news with foreboding.

What analysts say:

  • Buy, sell, or waffle? Twenty-three analysts try to read Palm, seven more than last quarter. Three think it's a buy, and 16 more believe it's at least safe to hold, but another four think it's time to cut your losses and sell Palm.
  • Revenues. On average, they're looking for sales to slip 10% to $352.4 million ...
  • Earnings. ... and for the company to report a loss of about $0.06 per share.

What management says:
For a company that's supposedly not reporting till Tuesday, Palm's been making an awful lot of news over the past couple of weeks. Earlier this month, Palm cratered its own stock with the surprising admission that it will probably report a loss of $0.08 to $0.10 per share on a non-GAAP basis, on as little as $345 million in sales. Thus, Palm seems almost guaranteed to miss both Wall Street's sales and earnings expectations.

Next, to add pink slips to misery, reports of layoffs began filtering out of the company last week. No official press release has yet issued, as far as I can tell, but the Associated Press quoted a Palm "statement" as saying the smartphone maker is laying off more than 100 of its 1,150 employees. Merry Christmas.

What management does:
Palm's gross margin slipped last quarter after climbing steadily for more than a year. The good news is that at 36.4%, it was still doing better by that metric than were most of its rivals -- Motorola (NYSE:MOT), Nokia (NYSE:NOK), Hewlett-Packard (NYSE:HPQ), and Apple (NASDAQ:AAPL), for example -- and lagging only Research In Motion (NASDAQ:RIMM) and Ericsson (NASDAQ:ERIC). The bad news is that at the operating-margin level, only Motorola lags Palm. And the worst news is that Tuesday's loss will quite likely leave Palm in last place for operating profitability.






















All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
I really wish I could say something nice about Palm. After all, the stock has been an active recommendation of Motley Fool Stock Advisor for the past two and a half years. But there's precious little to applaud in Palm's performance.

That's not just my opinion. In October, Fool co-founder and Stock Advisor co-advisor David Gardner slapped Palm with the "sidelined stocks" label. He criticized the firm's "softened" revenues and its abandonment of the Foleo laptop companion, and he warned our members not to "add new money at this time."

Last week's news of further product problems, coupled with apparent quality-control issues that are resulting in unanticipated large warranty expenses, tells us that the problems at Palm are both ongoing and wide-ranging. My read on the situation is that as bad as things look now, they're going to get worse before they get better -- if they get better at all.

Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy