UPDATE 1-Palm sees profit below expectations; shares fall

(Recasts, adds outlook, share price)

SAN FRANCISCO, Oct 1 (Reuters) - U.S. handheld computer maker Palm Inc (PALM.O) gave an outlook on Monday that was weaker than expected as sales of its Treo smartphone are hurt by rival devices, driving its shares down 4 percent.

In its first financial report since it sold a 25 percent stake to private equity firm Elevation Partners, Palm reported a net loss of 1 cent per share for its first quarter ended Aug. 31, in line with a warning it issued last month.

Palm said that for the current second quarter, it expected a profit, excluding special items, of 6 cents to 8 cents per share. That's below the average Wall Street outlook of 10 cents, according to Reuters Estimates.

The company sees revenue between $370 million and $380 million, shy of the $397 million expected by analysts.

Excluding special items, such as stock-based compensation and restructuring charges, Palm showed a profit of 9 cents per share, beating the average Wall Street target by a penny.

Analysts said Palm's sales have been hurt by rival devices such as Apple's Inc's (AAPL.O) iPhone.

Palm shares fell 4.1 percent to $15.35 in after-hours trade from a close of nearly $16 on Nasdaq.