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Palm Pre Plus (CDMA) Palm Pixi Plus (CDMA)

The Sunnyvale, Calif.-based company took a beating as its stock price plummeted 34.5 percent after it projected a third-quarter revenue of $300 million to $320 million, "well below" the $420 million estimate analysts had expected.

Sales of Palm's Pre and Pixi smartphones, which hit store shelves two years after the launch of the iPhone, stalled amid strong competition from Apple, Research in Motion and newcomer Google.

In addition, an exclusive deal with Sprint -- a smaller U.S. carrier that was dealing with high subscriber defections -- had limited the company's sales reach.

By the time the struggling handset maker began selling the Pre Plus and Pixi Plus with Verizon, competition within the smartphone sector had intensified.

In an email to employees last week, Palm's chief executive Jon Rubinstein implied that some of the blame lay with Verizon, but that the carrier planned to add more advertisements and nearly 200 staffers to train Verizon sales representatives.

"Verizon acknowledged that their execution of our launch was below expectations and recommitted to working with us to improve sales," said Rubinstein.

Still, Palm is making contingency plans, people familiar case say, by prepping the Pre and Pixi for an AT&T launch in the next few months.

However, some analysts now see the company -- with its large portfolio of patents -- as a potential takeover target.