Treo e-mail phone maker Palm Inc will post an unexpected second-quarter loss after sales missed its forecast because of delays in shipping a product. The loss is between 8 cents to 10 cents a share, before costs, Palm said on Thursday 6 December. Revenue fell to $345 million in the quarter ended 30 Nov, while analysts had anticipated a 4-cent profit and $378.2 million in sales. Palm did not identify the delayed product.

Palm is facing strong new competition from Research In Motion''s BlackBerry and Apple''s iPhone. It failed to get a key product certified for delivery during the quarter, chief executive Ed Colligan said. Higher warranty-repair costs and increased demand for lower-priced products cut further into the profit, the company, which is struggling to develop replacements for its traditional Treo line, said.

The announcement marked the second straight quarterly loss since buyout firm Elevation Partners agreed to acquire a 25 per cent stake in the company in June. Palm hired Jon Rubinstein, who was head of Apple''''s iPod business, as executive chairman following the Elevation buy-in. In October, Palm predicted a profit of 6 cents to 8 cents a share on sales of as much as $380 million, excluding one-time costs.

Profitability suffered after the company sold cheaper devices to appeal to a younger and broader audience. Sprint Nextel Corp started offering Palm''''s $99 Centro device last quarter, and sales of the device have been much higher than expected. In contrast, the Treo costs $199 with a monthly contract. Consequently, gross margins were 29.5 per cent in the second quarter, down from a previous prediction of at least 33.5 per cent, excluding one-time costs.

Palm has been slower than its Canadian competitor Research In Motion at updating its designs. Product delays also caused Palm to miss its forecast in the same quarter last year. In September, the company cancelled plans to sell a portable computer. In the second quarter of last year, Palm reported net income of $12.8 million, or 12 cents a share, on sales of $392.9 million.

The smartphone market is getting increasingly competitive, and unless a company regularly brings new products to market, it is bound to suffer. Sales at Research In Motion, which has introduced new video and music devices this year including the Curve, doubled last quarter to $1.65 billion. Apple sold more than 1.4 million iPhones from June through the end of September.