Palm has reported a drop of 61% in its third-quarter profits from last year amid rumours of a buyout.

While sales of the company's Treo smart phones reached record levels, it did little to bolster huge loses elsewhere in the company due to increased costs.

The company which which earned over $29.9 million in 2006, managed to earn just $11.8 million in the same quarter this year.

Earlier this week rumours surfaced that Motorola, Nokia and even HP might be interested in buying the company, however share prices have dropped almost 10% as a buyer failed to materialise.

“Treo smartphone sell-through and revenue reached record levels, and Palm products were available to smartphone customers through seven of the top 10 carriers in the world”, said Ed Colligan, Palm president and chief executive officer.

It seems however sales of the Smartphone, which the company bought from Handspring 4 years ago have failed to carry the rest of the company's offering.

On the back of today's results Palm estimates that year end revenue will be in the range of $400 million to $410 million.