Market mover: Palm

The rhythmic thud of technology stocks hitting the floor continued unabated last week with another high-profile disaster.

The rhythmic thud of technology stocks hitting the floor continued unabated last week with another high-profile disaster. Palm Inc, the US maker of hi-tech hand-held organisers, issued a profits warning, announced a 15 per cent cut in its workforce and prompted another huge fall in the Nasdaq.

Despite a couple of buoyant days at the start of last week, Wall Street confidence is in drastically short supply at the moment, and any rallies of the sort that took the Nasdaq up by 55 points last Tuesday are just waiting to be reversed.

Palm provided the perfect excuse for that when it served up its latest helping of bad news on Wednesday. Its own shares were savaged by the market, which sliced 48 per cent off its value. A year ago, Palm was trading at nearly $100 a share, but last week saw its worst one-day slide ever. This put Palm in the growing club of companies that have lost 90 per cent since the Nasdaq peak last March.

The big chip-makers, computer manufacturers and network companies have all now reported slowing sales and dwindling profits, but optimists have explained that as part of the slowdown in equipment spending by corporations, rather than individuals. Palm's products, on the other hand, clearly fall into the category of consumer spending.

Palm's results were a foretaste of bad reports to come, and gave panic free rein. The Nasdaq fell 6 per cent on the news, as computer telecoms and other consumer technology stocks fell in sympathy.

But even if the share-price mayhem was overdone, Palm's announcement gave the market a glimpse of a company in trouble beyond a general economic downturn.

Palm used to rule the handheld roost with its device, but Compaq and Handspring have both launched similar devices, which have forced Palm to massively increase its spending on developing new products.