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In wake of loss, Palm looks to Pre as savior

Revenue and earnings plummeted in the quarter that ended before the Palm Pre went on sale, but execs expect the new smartphone to spur a revival.

Palm announced big losses for its fiscal fourth quarter, the last quarter before its hot new smartphone hit the market, but executives see the Pre as the key to its turnaround.

Palm Pre Sprint Nextel

CEO Jon Rubinstein said Thursday during the company's earnings conference call that sales of the Palm Pre, which hit the market on June 6, have been "strong and growing."

He didn't give exact sales figures for the device, which has a touch screen and uses a new operating system call WebOS, but he added that he "couldn't be happier with our launch." Analysts estimated that between 50,000 and 100,000 Pres were sold in the first few days that the device was available. The phone is exclusively available on Sprint Nextel's network.

That's the good news for Palm, which on Thursday reported a dismal fiscal fourth quarter, which ended May 30. For the quarter, Palm reported a loss of $91.5 million, or 78 cents a share, compared with a year-earlier loss of $41.1 million, or 40 cents a share. Revenue fell 71 percent to $86.8 million.

But Palm's new CEO, a former executive at Apple's iPhone music player division who replaced former CEO Ed Colligan earlier this month, thinks the company is on the right track with the Pre.

"The launch of Palm WebOS and Palm Pre was a major milestone in Palm's transformation; we have now officially reentered the race," Rubinstein said in a statement. "We have more to accomplish, but the groundwork is laid for a very promising future here at Palm."

While it's unlikely the Pre will catch up to Apple's iPhone anytime soon, analysts are predicting a heavy volume of sales. Some say that the company could sell about 100,000 handsets in July and 200,000 in August.

Rubinstein said he was confident that the company would meet demand for the new device.

Palm has been banking on the Pre to help it revive its ailing smartphone business. But the company faces stiff competition from others, such as iPhone maker Apple and BlackBerry maker Research In Motion.

One thing that might hold back adoption of the Palm Pre is the fact that only a handful of applications are yet available for the phone. But Palm executives said on the call that they are working to get more apps out to users. That said, the market research firm Medialets reports that Pre users have already downloaded over a million applications so far.