Shares in Palm, the embattled handset manufacturer, fell by nearly 19 per cent yesterday after the company warned investors that it will post a loss in the quarter ending November 30.

Palm, which has suffered from strong competition from rival makers RIM and, more recently, Apple, said it now expected revenues to be in the range of $345-350 million (£169-172 million), down from a previous estimate of $370-380 million, blaming product delays.

The guidance sparked fears that the company would be unable to capitalise on the end-of-year shopping season, and prompted further doubts among analysts about whether Palm would be able to update its portfolio of devices, which has suffered from a lack of innovation in recent years.

The shares fell slightly today after closing at $5.45 in after-hours trading yesterday.

Palm, which makes smartphones and personal organisers principally aimed at business users, said it now expected a loss of 8-10 cents per share, compared with the 4 cents earnings per share that analysts had been predicting.

It also revised down its gross profit margins estimate, from 33.5-34 per cent to 29.5-30 per cent, blaming unspecified product delays and warranty overruns.

Analysts said that the lower forecasts were indicative of tough competition in the smartphone market, principally from RIM, which makes the BlackBerry, but also from Apple. They also pointed to the fact that Palm had failed significantly to overhaul its portfolio, which is still heavily reliant on the now tired Treo brand.

According to Gartner, Palm has only a 2.2 per cent share of the combined cellular PDA and smartphone market globally – far behind market leader Nokia, with 49 per cent, and its closest competitor RIM, which has 10 per cent.

As of the last quarter even Apple, which only released its iPhone in the US in June, has a greater share than Palm in North America.

"2008 is going to be a critical for Palm," Roberta Cozza, a Gartner analyst, said. "They're now very exposed to the competition, including new entrants like Apple, and haven't presented a clear strategy for where their products or their Windows-based platform are going."

She said that while Palm had updated its Treo line of products, the new versions did not represent any radical departure from what had come before. The attempt to expand into more consumer-friendly devices – as evidenced by the release of the Centro, a less bulky handset released in September – had suffered from a lack of range.

"If you're going to try to target consumers, you need a full range of products, as well as a strong line-up of services and applications on those products, and the Centro hasn't delivered that," Ms Cozza said.

In a note, Jeff Kvaal, an analyst at Lehman Brothers, also revised down his estimate for the company's performance, saying: "Our negative thesis assumes that Palm will not be able to expand its operating margin beyond its recent performance in the mid single digits."

Earlier this year there was speculation that Palm could be sold, with Nokia, Motorola and the private equity players Texas Pacific Group and Silver Lake Partners cited as possible buyers.

In May, the company unveiled the Foleo, a cross between a laptop and a PDA, to lukewarm reviews. Several months later Ed Colligan, the chief executive, announced that the launch was cancelled, adding that the company would take an associated $10 million charge.

Palm is due to reveal details of new devices planned for release next year in the coming months, and reports its second fiscal quarter results on December 18.

In after-hours trading yesterday, Palm share fell $1.14 to $5.45, having closed at $6.59.

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