Palm Inc shares tumbled on Monday, weighed down by the resignation of the chief of its webOS phone software and signs a sale of the smartphone maker may not come as soon as some anticipate.

The shares were down 11.6 percent on the first trading day after Palm said Michael Abbott, Senior Vice President of Software and Services, had submitted his resignation from the maker of the Pre and Pixi mobile phones.

Abbott, a former general manager at Microsoft, joined the company in 2008 to head development for webOS.

He is expected to leave the company at the end of this week.

We are concerned by the departure of Mr. Abbott, as he had principal responsibility for Palm's webOS software, one of the company's few remaining assets, said CL King & Associates analyst Lawrence Harris.

WebOS is the main reason, analysts say, more than Palm's patents or relationships with mobile carriers, that a suitor would desire the money-losing smartphone maker that has hired bankers to explore several options, including a sale of the company.

In a regulatory filing on Friday, Palm also disclosed moves to hang on to other executives by announcing a retention program that includes bonuses of $250,000 each for Global Operations chief Jeffrey Devine and including Chief Financial Officer Douglas Jeffries. The incentives are only valid if they stay with the company for another two years.

Citing the executive moves, Morgan Keegan analyst Tavis McCourt on Monday downgraded Palm to underperform from market perform, saying that the smartphone maker's recent activities do not inspire confidence about its ability to sell out at a premium valuation in the near term.

Shares of Palm -- which has for years been seen as a acquisition target -- have fluctuated wildly in recent weeks on persistent rumors that it may be on the block. Palm representatives have repeatedly declined to comment.

The shares, which fell 65 cents to $4.94 on Nasdaq in afternoon trading on Monday, have declined move 40 percent this year on weak sales, and increased competition from Apple Inc's iPhone, Research in Motion Ltd's BlackBerry, and smartphones made with software developed by Google and Microsoft.

That competition may have spurred a shift by retailer RadioShack according to CL King's Harris, who suggested that the chain has phased out sales of Palm's Pre and Pixi phones.

The Sprint version of the Palm Pre and Palm Pixi have disappeared from RadioShack's website, he said in a client note, added that a manager at a local shop said sales of the Pixi would be limited to the stock on hand, with no further shipments expected.

Representatives for RadioShack and Sprint were not available to comment on the report.

(Reporting by Franklin Paul in New York, Sinead Carew in Dublin and Manasi Phadke in Bangalore; Editing by Don Sebastian and Tim Dobbyn)

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