Bad news continues to come to embattled smartphone maker Palm, with Standard & Poor's downgrading the company's credit rating.

Palm Inc

Citing lower sales, S&P downgraded its Palm rating from B1 to CCC+.

S&P also said that the company's outlook is negative and likewise lowered ratings on Palm's secured term loan and revolving credit facility from B- to CCC from B-.

MarketWatch quoted an S&P analyst as saying that the downgrades "reflect Palm's announcement that sales in the November 2008 quarter will decline to about half of the August quarter's level, reflecting challenging economic conditions and market share losses."

Palm has long been toppled as leading handheld and smartphone maker by rivals Nokia, RIM and recently Apple, and is saddled by repeated delays in the release of its next-generation operating system.