Stiff competition and waning demand for PDAs mean times are lean for Palm

Palm has posted quarterly net losses of $840,000 (£412,000) compared with profits of $16.5m (£8.1m) for the same period last year.

The firm is blaming restructuring costs and dropping demand for personal digital assistants (PDAs) – its core product.

The traditional PDA market is coming under competitive pressure from smartphones, which bundle internet functions into a mobile phone package.

But smartphones are also the key to reviving Palm’s fortunes, says chief executive Ed Colligan.

“Two product launches in September demonstrate our commitment to delivering competitive, high-quality solutions and expanding our reach to a broader market and range of customers,” he said.

But the firm’s development of a smartphone product has been slow, and sales of its previously market-leading Treo are being overshadowed by Research in Motion’s (RIM) BlackBerry and Apple’s iPhone.

In the second quarter of this year RIM shipped 2.4 million BlackBerrys, double that of a year ago. And the much-hyped iPhone debuted in June and sold more than a million units within the first three months. By comparison, Palm sold 689,000 units in the first quarter.

But the iPhone is not the only reason for Palm’s poor performance, according to Joss Gillet, senior analyst at Ovum.

“Palm’s problems started a long time ago – it has faced strong competition for a while from RIM, Motorola and Nokia products,” he said.

The results are the first posted since Palm sold a quarter of its shares to private equity house Elevation Partners in June 2006.