March 20, 2008 / 8:25 PM / 10 years ago

UPDATE 3-Palm posts quarterly loss despite strong Centro sales

(Adds additional comments from conference call)

SAN FRANCISCO, March 20 (Reuters) - Palm Inc PALM.O, maker of the Treo smartphone, on Thursday posted a quarterly loss, hurt by restructuring charges and other items, results that were in line with an earlier forecast.

The company also said its lower-priced Centro was off to the strongest start of any smartphone in Palm’s history. Some 70 percent of Centro buyers are trading up from traditional phones, it said.

Palm’s net loss for its third fiscal quarter ended Feb. 28 was $31.5 million, or 30 cents a share, compared with a profit of $11.8 million, or 11 cents a share, a year ago.

Palm, whose Treo phone competes with Research In Motion Ltd’s RIM.TO Blackberry e-mail device and Apple Inc’s AAPL.O iPhone in the market for phones with mini keyboards and computer-like features, said revenue fell to $312.1 million from $410.5 million in the year-ago quarter.

In December the Sunnyvale, California-based company forecast third-quarter revenue of $310 million to $320 million.

Chief Executive Ed Colligan, on a conference call, attributed the drop in revenue to continued declines in its traditional handheld business and its aging Windows Mobile product line. Brisk sales of the Centro, which also carry lower gross margins than its Treo line, were not enough to offset the negative factors.

Palm plans to update its Windows Mobile smartphone products this summer, Colligan said. It also plans to refresh its product line targeted at corporations early in 2009.

Palm in December had forecast a loss before certain items of 14 cents to 16 cents per share for the quarter, worse than the average Wall Street estimate at the time of a 4 cent loss. It said its net loss would range from 31 cents to 33 cents per share.

Analysts on average had expected a loss before unusual items of 15 cents per share, on revenue of $315.8 million, according to Reuters Estimates.

Excluding the restructuring charge and other items, Palm said it had a loss of $17.0 million, or 16 cents a share.

Shares of Palm rose 17 cents, or 3.7 percent, to close at $4.72 on Nasdaq. The stock was unchanged in after-hours trade.

Palm also did not issue a forecast for its current quarter. The company said in December it would stop doing so, instead limiting its comments to “general business guidance and comments on industry trends.”

“We’re really trying to stay focused on the long term,” Colligan said in response to a question on the call.

“We really do believe we will see a turning point in the business” as Palm moves into the first half of its fiscal 2009, he added. (Reporting by Duncan Martell; editing by Richard Chang, Phil Berlowitz)

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