Smartphone pioneer Palm (NASDAQ:PALM) has announced quarterly results for the period ending 26 February 2010. Under the new GAAP revenue recognition rules, sales for the quarter stood at US$350 million while gross profits remained at US$47 million.

On the operating margin front, the company recorded loss of US$118 million, and sustained net loss of US$22 million. The new GAAP rules affected losses on account of the anti-dilutive provisions of Palm's series C preferred shares and related warrants. Net loss under non GAAP measures stood at US$103 million. In the same quarter last year, loss amounted to US$94.7 million. Although the sales in the quarter came well above expectations, this was largely a result of stocking up by partners, with end-user sales falling further.

Palm is a prime example of how a company with a first mover advantage and critically acclaimed product can make it all wrong. Sales have been dwindling for long and the delay in talks with Verizon seems to have caused an irreversible damage at least in sales. It is interesting how Palm CEO Jon Rubinstein recall the experience, “If we could have launched at Verizon prior to the Droid, I think we would have gotten the attention the Droid got. And since I believe we have a better product, I think we could have even done better”.

Palm still has high levels of cash stashed in bank. However, the same is reducing at an ever increasing rate due to losses. Cash and cash equivalents stood at US$376.3 million from US$263.5 million in the prior quarter. In addition, the company had short term investments of US$215.6 million, down from US$326.5 million in the prior quarter. In total, current assets at the end of the quarter amounted to US$743 million lower from US$909 million in the prior quarter.

Along with the quarterly results, the company has issued weaker than forecast sales outlook for the fourth quarter. The next quarter looks set to be painful unless a new marketing push can reinvigorate sales, but it will have to work hard to surmount the lack of early momentum.

The stock is trading down more than 20 percent making a new 52 week low.