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Missing product ruins Palm's Christmas

Company fails to ship a product it expected to release this quarter, and both revenue and margins will suffer as a result.

It's not going to be a happy holiday season for Palm employees.

The company issued a statement after the close of the market Thursday warning that revenue for its second fiscal quarter would be about $30 million less than it had predicted. In addition, its gross margin is expected to be about four points lower. It's just the latest item of bad news from a company that can't wait for 2007 to end.

Not as much money is coming into this building as Palm had hoped. Palm

The reasons? Palm failed to qualify "a product that the company had previously expected to have certified within the quarter," it said in its statement. It had higher-than-expected warranty expenses, which is never a good thing. And even the only piece of good news was still sort of bad: higher-than-expected shipments of Palm's new Centro smartphone meant that the average selling prices of its products fell.

Is it officially time to start the Ed Colligan Watch? With Elevation Partners packing the board of directors with its people, it's hard to imagine that the company could allow this to continue much longer. Palm's CEO has done several things right, such as the decision to embrace Windows Mobile as Palm OS development stagnated, but the company has also let the part it controls--the hardware--grow stale compared with the likes of Apple, Nokia, LG, Samsung, and even Motorola. And don't forget the Foleo.

Palm's stock was trading beneath its 52-week low Friday on the news. And with the next version of the Palm OS not expected until 2009, it's probably going to be a rocky year for the company.