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Palm shrugged off talk of a legal assault by Apple as it prepared to make a splash in Barcelona around its Pre smartphone, and hinted at keen pricing, but RIM's shares slumped as it warned of disappointing margins and earnings, driven by its own need to join the smartphone price war.

Palm is in the honeymoon period - from a marketing if not sales point of view - between making a big launch impact and actually having to report sales figures for its make-or-break smartphone. RIM, which is chasing the same crossover market from its enterprise heartland, has to deliver real results for its own flagships, Bold and Storm. These have helped drive increases in sales and subscriber numbers, but in the race to keep volumes up despite the downturn, RIM has been eating into its margins, and in some cases, selling phones for less than it costs to make them, according to some sources.

The Canadian firm said it will outdo its previous forecast for its fourth quarter of 2.9m net subscriber adds by more than 20%, after record subscriber growth in December and "strong levels following the holiday buying season". But it expects revenue to be "at or near the midpoint" of its December forecast of $3.3bn to $3.5bn, with gross margin and earnings per share "at the low end" of the previous forecast.

"A variety of factors, including product mix, lowered channel inventory levels and an increased ratio of new subscriber sales to upgrade and replacement sales, are contributing to the degree of outperformance in subscriber growth relative to revenue and earnings performance within the quarter," RIM said in a statement. Older models like the Curve have lower average selling prices than the new 3G smartphones, but higher margins. RIM shares fell $9.29, more than 16%, to $47.75 on the warning.

Meanwhile, Palm's CEO Ed Colligan was talking up the Pre and its new operating system once again, this time at the Thomas Wiesel Technology and Telecom Conference in San Francisco. He downplayed the risk of patent lawsuits from Apple, despite recent hints from the iPhone maker that it would aggressively protect its multitouch IPR. Colligan said Palm had its own strong arsenal of 1,500 patents and did not expect trouble. "The reason you do that is to have a defensive position in the marketplace. It's kind of like two little porcupines going around, and you don't want to touch each other because you might get stung."

Colligan also confirmed that the Palm OS is now officially dead, and the company will just support the new Linux-based WebOS and Windows Mobile, though there are no plans to license WebOS to third parties. It will launch an application store with the Pre but will also allow users to download software from other sources, as Palm customers can now. He would not open up on Pre pricing when it launches, initially as a Sprint exclusive, probably in May. He did say that Palm aims to return to gross margins of 30%-plus "in the long term" and that Sprint will make "a significant investment" (ie subsidy) into the price of the Pre, which suggests it will be very competitive even with the falling prices of iPhones.

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