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Palm revenue craters as Treos fall out of favor

Second-quarter revenue will be far lower than analysts had expected as sales of Treos continue to dwindle without Palm's next-generation operating system.

The Centro is keeping Palm afloat, but it needs more than pretty colors to get back on track.

With revenue falling to dire levels, Palm may need a Christmas miracle to stay afloat next year.

The latest dose of bad news? Revenue for Palm's second fiscal quarter, which ended last week, will be just $190 million to $195 million, the company announced Monday ahead of its December 18th conference call. Wall Street analysts had been expecting Palm to record $331 million in revenue, an astonishing 41 percent gap caused by "reduced demand for maturing smartphone and handheld products," Palm said in a press release.

Last week Palm revealed plans to cut workers and refocus its business as it copes with a poor economy and strong competition from the likes of Apple and Research in Motion. Palm's Treos were once very popular, but they have looked positively ancient against the iPhone and new BlackBerrys such as the Storm and Bold. If it wasn't for the Palm Centro--which doesn't really break any ground on the software front but costs an attractive $99--Palm might already be dead.

The company's fortunes will be determined by a race against time: if Palm can get products using its Nova operating system--which scheduled to arrive in the first half of 2009--out in the market before sales of Treos dwindle to zero, it has a chance to regain its perch atop the mobile computing world. Otherwise, Palm is stuck in a moment and it can't get out of it.