Palm gets fingers burned in share price collapse

Shares in Palm fell 49 per cent to $8.06 before the markets turned on rival companies Handspring, Psion, and Research in Motion, driving Handspring shares down 29 per cent.

A favourite until just days ago, Palm now finds itself accused of such deadly financial faults as 'near term saturation' by Merrill Lynch and other analysts.

One source of unrest was the report by Judy Bruner, CFO of Palm, who said the company's inventory had grown by $69m last quarter and would jump by $200m this quarter with half of that representing excess production of existing models.

On Tuesday, Palm announced better than expected third quarter profits, but warned of expected losses in the last quarter and falling sales and announced that it will cut 250 of its 1,900 permanent and contract staff.