However, analysts say handheld sales have remained robust, despite the slump in the PC market.
Just last week, a Bear Stearns survey found that 94 percent of retailers reported demand for Palm devices as good as or better than expected.
Several analysts have recently stated that the Santa Clara, Calif.-based company could beat the consensus earnings estimate of 4 cents per share on revenue of more than $500 million.
"Despite concerns regarding U.S. retail sluggishness, we believe handheld devices will be one of the most popular gift categories during the holiday season," Gillian Munson, an analyst at Morgan Stanley Dean Witter, said in a report last week.
Canada's Research In Motion also will report earnings Wednesday.
Merrill Lynch analyst Virginia Genereux forecasts break-even results, compared with the consensus estimate that RIM will lose 1 cent per share. In a report Tuesday, Genereux said she expects sales of $53.5 million. She also predicts that the number of subscribers using RIM's BlackBerry two-way pagers will rise to 100,000 from 75,000 at the end of last quarter.
However, any good news from Palm and RIM may not have much spillover beyond other handheld companies.
Despite expectations, Palm does face some scrutiny.
Investors will be looking for word on the component shortages that have limited Palm's ability to ship as many units this year as it would have liked. Palm executives said last week that parts woes have eased in general, although some components still remain in short supply.
Analysts will also be watching for Palm's forecast for revenue from the licensing of its operating system and from selling Internet service to Palm VII owners. Last quarter, such items made up only 3 percent of Palm's revenue. But Palm is trying to expand the revenue from these sources.
Palm recently outlined a number of its plans for next year. These include a new version of the operating system that supports improved color screens, as well as handhelds that will have expandable memory via a postage-sized card known as Secure Digital.