At issue is the handheld-device maker's fiscal Q3 sales outlook, along with charges for restructuring purposes and to write down its Silicon Valley real estate.
Palm now anticipates revenues of between $205 million and $210 million for the quarter. Previously, the company forecast sales of $230 million to $250 million. Year-earlier Q3 sales were $292.7 million.
It pointed to weakened demand for its high-end Tungsten T handheld model as part of the reason for its lower-than-expected sales. The company cut prices (to $399) on the Tungsten T in early February, but that wasn't enough to make up for lackluster demand. Palm blames a poor corporate IT spending environment for the shortfall.
That raises some questions about its just-released $549 Tungsten W and its corporate target market. The PDA/cell phone combo is getting rave reviews for its PDA capabilities, but poor marks for its phone use and average grades for email. Without a speaker or microphone, one must use the earbud for calls. That's a big disadvantage over similar products, such as Handspring's Treo 300, which can be held right up to the ear like any other cell phone. Palm will offer a $40 flip cover in June to alleviate this problem, but that seems like an afterthought for basic functionality.
With sales of the cheaper Tungsten T lagging, it's hard to imagine the Tungsten W -- and its expensive idiosyncrasies -- catching on quickly. For Palm, continued high-end handheld weakness will be painful.