Economic Slowdown to Hurt Handheld Sales (Updated)

Palm's chief marketing officer, Satjiv Chahil, warned yesterday that demand for his company's products is slowing as consumers reduce spending amid the U.S. economic slowdown. While growth will still be strong, it won't compare with the stellar sales growth in previous years. Today, Greg Rhine, Palm's VP for worldwide sales, made it clear that Mr. Chahil opinions are not shared by Palm Inc.

Mr. Chahil predicted that the entire market for handhelds is set to expand by 40% to 50% this year, after doubling last year. "It's still 50 percent growth,'' Mr. Chahil said. "How do you declare that as the sky falling down?''

"Third-party analysts are indicating 40 to 50% growth rates for (the industry) this year,'' Mr. Rhine said. "Our company is in a quiet period. We are not commenting on our own outlook.''

According to brokerage Lehman Brothers, Palm's sales were a bit weak in early March but wasn't sure if this was related to retailers waiting for the new m500 series.

Mr. Chahil's statement doesn't appear to have spooked Palm's investors. Its stock is up slightly in early trading.

Mr. Chahil also predicted that Palm's share of the market "won't be affected much'' by the slowdown. Palm sells the lion's share of handhelds, with devices running its OS making up about 90% of the market.

This is just the latest in a series of warnings about sales and profits from technology companies. "There's this cloud of economic uncertainty that turns into a scare," Mr. Chahil said. "What happens in that environment is that you end up with consumer hesitation."