Oct. 1 (Bloomberg) -- Palm Inc. had its first loss in more than three years as sales of its Treo e-mail phone lagged behind the BlackBerry and iPhone. The company's shares fell 4.4 percent after this quarter's forecast missed analysts' estimates.

The first-quarter loss was $841,000, or 1 cent a share, compared with a profit of $16.5 million, or 16 cents, a year earlier, Palm said today in a statement. Treo unit sales fell to 689,000 in the quarter, which ended Aug. 31, from 750,000 in the previous period.

Palm stepped up product development and marketing after trailing Research In Motion Ltd., maker of the BlackBerry, in updating its designs. The company also faces competition from Apple Inc.'s iPhone and e-mail phones from Motorola Inc. and Nokia Oyj. Until new Palm products appear, the company may continue to lose sales, analysts say.

``They need new products out as soon as possible,'' said Pablo Perez-Fernandez, an analyst with Global Crown Capital in San Francisco. He rates the stock ``overweight.''

Sales in the quarter rose 1.4 percent to $360.8 million, compared with the $359.9 million average estimate in a Bloomberg survey of analysts. The company said last month that sales ranged between $359 million and $361 million.

Palm today forecast second-quarter earnings, excluding some costs, of 6 cents to 8 cents a share on sales of $370 million to $380 million. Analysts had predicted earnings of 9 cents on sales of $411.3 million. In the year-earlier period, the company earned 17 cents on sales of $392.9 million.

Shares Fall

Palm shares dropped 70 cents, or 4.4 percent, to $15.30 in extended trading after the report. They had fallen 27 cents to $16 at 4 p.m. New York time on the Nasdaq Stock Market. The stock has gained 13 percent this year.

Palm's operating costs, including ads and research, rose 25 percent in the period from a year earlier. The company also canceled plans last month to sell a portable computer in order to focus on mobile phones.

Excluding some costs, earnings last quarter were 9 cents a share. Analysts in the Bloomberg survey had estimated 8 cents. Palm said last month it would report earnings of 8 cents to 9 cents.

Research In Motion, based in Waterloo, Ontario, probably shipped about 3.18 million BlackBerrys in its latest quarter, RBC Capital Markets analyst Mike Abramsky wrote in a note today. The company reports earnings on Oct. 4.

Apple's IPhone

The iPhone, which combines Apple's iPod music player with a Web-browsing mobile phone, sold 1 million units in the first 74 days after its June 29 debut. Cupertino, California-based Apple cut the iPhone's price by $200 last month to lure more buyers.

The price cut had ``very little impact'' on Treo sales, Palm Chief Executive Officer Ed Colligan said today on a conference call.

Palm will start selling a cheaper e-mail phone this month called the Centro to appeal to a broader market. The $99 device will be available from Sprint Nextel Corp., the third-largest U.S. wireless service provider. The Treo typically costs $199, similar to some BlackBerry models. The iPhone sells for $399.

The Centro won't help Palm boost sales in the current period because the device is only available through Sprint initially, Perez-Fernandez said.

The average price of a Palm phone may drop 10 percent or more this quarter, partly because of the Centro, Colligan said.

``We wanted to broaden our portfolio,'' Colligan said. Still, the Centro doesn't signal that Palm is giving up on the market for more expensive phones, he said.

``We are not ceding the high end,'' Colligan said.

To contact the reporter on this story: Ville Heiskanen in New York at vheiskanen@bloomberg.net

Last Updated: October 1, 2007 18:49 EDT