Even as the broader markets surged, shares of Treo maker Palm Inc. declined sharply Friday as analysts said the smartphone's lack of carrier support in the U.S. market could make it difficult to generate meaningful revenue growth.

The stock fell 56 cents, or 6.6 percent, to $7.93. The stock gave back nearly half the gains it made Thursday ahead of Palm's earnings report.

Late Thursday, Palm said losses widened to $41.9 million, or 39 cents per share, for the quarter ended Aug. 31, as revenue edged up less than 2 percent to $366.9 million. But results were better than analysts had expected, and the company's quarterly smartphone sales rose 49 percent year-over-year to about 1 million units.

However, First Analysis Securities Corp. analyst Scott Pope noted Friday that Palm's management suggested revenue would fall in the current quarter. The Centro phone, which he estimates makes up 80 percent of unit sales, was launched last year and is getting old amid steep competition with the Blackberry and iPhone. Meanwhile, the lack of a carrier agreement for the new high-end Palm Pro means the product may be difficult to push in the U.S. market, which accounts for 90 percent of Palm's sales.

"We remain cautious about Palm's overall position in the smartphone market," Pope wrote.

Citi analyst Jim Suva said he thought the current quarter should be seeing seasonal benefits, not declines, and is concerned about the Centro's longevity. He said Palm definitely reported a good quarter, but competition is intensifying in the smartphone market and he would need better visibility on the timing of new product launches. He maintained a "Sell" rating on shares.

However, Cowen & Co. analyst Matthew Hoffman reiterated an "Outperform" rating on the stock. He said a crowded smartphone line-up at AT&T and Google Android OS-smartphones at T-Mobile during the fall and holiday season likely limit opportunity for Treo Pro sales in North America in the current quarter, but Treo Pro will be a larger part of the mix with European operators.

"We believe Palm's new OS will ultimately provide differentiation and return the company to profitability in the fiscal fourth quarter," Hoffman wrote in a note to investors. The new OS is on track for the end of this year, with new products expected in the summer of 2009.