Photo credit:Palm

Palm Inc. said it sold 823,000 smartphones during its recently completed first fiscal quarter, dominated by the recent launch of its Pre device. Despite the better than expected sales and a lower than expected net losses for the quarter, a tepid forecast for Q2 sales that include the lead up to the holiday shopping season sent the company's stock down more than 4% in early Friday trading.

Palm said total device sales were up 134% sequentially, mainly due to the launch of the Pre by Sprint Nextel Corp. in the U.S. and later by Bell Canada, but a 30% drop from the year-ago quarter when the company was seeing strong demand for its entry-level Centro device and to a lesser extent to its Microsoft Corp. Windows Mobile-powered devices.

During its conference call with analysts Palm said it would focus on its WebOS platform that underpins the Pre and the soon-to-launch Pixi device and divert resources from its legacy Palm OS and Windows Mobile devices. The Pixi is expected to replace the Centro as its entry-level device near the $100 price point, while the Pre has managed to secure the higher-tier sales momentum from the company's business-focused Treo line up.

“Well, as we've said, we are going to be focusing all of our effort in the future on building WebOS products and so while there are still Centros and Treo Pros moving through the channel right now, our future engineering efforts are based around WebOS because we are absolutely confident in where we are going with WebOS,” Palm Chairman, President and CEO Jonathan Rubenstein said in response to a question during the call.

The move should not have a huge impact on Windows Mobile sales as Palm was a small and getting smaller piece of the platform's sales.

Palm also announced plans to sale approximately 16 million common shares to raise needed capital. Current investor Elevation Partners has indicated it plans to purchase $35 million worth of the offering. Palm said it plans to use proceeds from the sale for working capital and general corporate purposes.