Palm plans to cut its workforce by 13 per cent and make other cutbacks in response to "a reduced revenue outlook" and expected fourth-quarter losses.

Palm will lay-off about 250 full-time employees and contract workers. The company employs about 1,900 people. Palm also indicated that further lay-offs are likely following the completion of its acquisition of Extended Systems in June.

The cutbacks were announced as Palm reported results for its third financial-quarter, which ended March 2. The company has increased its revenue by 73 per cent from the same period a year ago to $470.8 million. Palm said fourth-quarter revenue is expected to total $300 to $315 million, down from the year-ago figure of $350 million.

Slowing sales Palm is feeling the effects of the softening US economy, which has resulted in a reduction of orders, said Palm CEO Carl Yankowski. The company is also being affected by the product transition to its new m500 devices - which are not expected to ship in volume until the last month of Palm's fourth quarter.

The company expects a net loss of $36 million in the fourth quarter ending in early June, according to today's announcement.

Yankowski called the layoffs a necessity in "today's very turbulent business environment". What Palm is experiencing is part of "what appears to be a technology sector slowdown", combined with the product transition, he added.

The company is also postponing construction of its headquarters in San Jose that was expected to cost $460 million over a seven-year period.