It seems that Palm is lining up for a fairly disappointing conversation with its shareholders, with word that the company’s CEO has warned employees that times things have been rough for Palm.

Palm's Pre has always looked nice, but it seems like that's not quite enough...

Word of the shaky figures comes via a letter sent to Palm employees by company CEO Jon Rubinstein, in which it’s pointed out that the company will be posting revenues for Q3 of somewhere between the $300 million mark and $320 million, which will very likely be something of a disappointment for any Palm investors, who had previously been told to expect somewhere in the realm of $1.6-1.8 billion. Still, Rubinstein was fairly open about the situation, saying that,

“I realise this news is difficult to swallow. We made this announcement today to prevent a surprise for Wall Street when we announce quarterly earnings in March. In the meantime, the entire executive team has been working hard to improve product performance, and have implemented a number of initiatives to increase awareness and drive sales.”

While this is certainly bad news for the folks at Palm, it’s not the first indication we’ve had that things haven’t been going too well for the company since the release of its Pre Smartphone last year. Indeed, breakdowns of mobile OSes tend not even to show WebOS in their various charts, something that will likely have tipped many off to the situation at Palm long before Palm itself said anything about it.

It’s not great news, but it is interesting to see Palm’s CEO being quite so open about the company’s situation. The letter to Palm’s employees doing the rounds isn’t too unexpected, but it certainly doesn’t cast Palm in too negative a light.

Anyway, you can read the rest of the open letter below:

Team,

This morning we announced preliminary results for our 2010 third quarter. Since the quarter has not yet closed, it is too soon to offer exact numbers, but we stated that we expect to report revenues for Q3 between $300 and $320 million. We also announced that we expect our revenue for this fiscal year to fall below the guidance we gave to Wall Street, which ranged from $1.6 to $1.8 billion. As we mentioned in our press release, our softer than expected performance is due to slower than expected customer adoption of our products, which in turn has prompted our U.S. carrier partners to put additional orders on hold for the time being. On a positive note, we expect to exit the quarter with over $500 million in cash on our balance sheet. We’re scheduled to announce our full financial results in March.

I realize this news is difficult to swallow. We made this announcement today to prevent a surprise for Wall Street when we announce quarterly earnings in March. In the meantime, the entire executive team has been working extremely hard to improve product performance, and have implemented a number of initiatives to increase awareness and drive sales.

Dave Whalen and I just returned from a very successful meeting with Verizon Wireless, where they acknowledged that their execution of our launch was below expectations and recommitted to working with us to improve sales. To accelerate sales, we initiated Project JumpStart nearly three weeks ago. Since then, nearly two hundred Palm Brand Ambassadors, supplemented by Palm employees from Sunnyvale, have been training Verizon sales reps across the U.S. on our products. Early results from the stores have already shown improvement on product knowledge and sales week over week. You may have also seen a growing number of Palm ads on billboards, bus shelters, buses, and subway stations-all getting the word out about Palm.

All of these efforts are examples of how we are working to accelerate adoption and grow distribution of webOS. In the next few weeks, your management will work with you to make sure your priorities are laser-focused, primarily on helping to increase sales, improve product quality and differentiate the Palm product experience.

Our goals are taking longer than expected to achieve, but I am still confident that our talented team has what it takes to get the job done.
We’ll schedule an all-hands meeting after our earnings announcement in March, and I’ll be happy to answer your questions.
Go team!!!
jon