Palm Death Watch

One of the last times we wrote about struggling smart phone maker Palm Inc. (PALM), we reviewed how the 2007 investment it had received from private equity firm Elevation Partners would probably not be enough to save it.

A cash infusion, and even some substantial management changes, seemed insufficient to address the lack of innovation that over the years had changed the company's status from cutting-edge smart phone inventor to increasingly irrelevant player falling further behind up-and-comers like Apple Inc. (AAPL) and Research in Motion Ltd. (RIMM)

Large ships -- and even medium-sized ones for that matter -- can take a while to sink, but while Palm is still afloat, it's hardly going strong, and its demise seems closer at hand. The latest warning comes from Global Crown Capital analyst Pablo Perez-Fernandez, who as Barron's reports, is expecting the company's already depressed stock price around $2.26 will fall to about $1.50. The analyst also outlines a likely chain of events stemming from last year's investment from Elevation Partners that could ultimately be its undoing.

With its capital dwindling, Perez-Fernandez says, the company will likely be forced to seek "highly dilutive capital" that could trigger a put option on shares to reimburse Elevation for its $325 million investment at a premium.

"Could this holiday season mark the beginning of the end for Palm? We posit that this could be the case," the analyst writes.

He says nothing about a possible acquisition of Palm, and the rumor mill on that front has been pretty quiet for some time. But since all sorts of combinations are possible, especially when values get cheap and companies get both desperate and opportunistic, it seems appropriate to throw this commentary in with the notion that PC maker Dell Inc. (DELL) might acquire a smartphone maker. -Andrea Orr

See Nov. 24 post on Global Crown Capital downgrade of Palm from Barron's
See Nov. 24 post on the merits of a smart phone acquisition for Dell from SeekingAlpha.com

Comments

[Yagottabe K...:]

Oh brother. Two articles in a row on SA pumping the "Dell Buyout!" rumor a-GAIN.

Completely innocent coincidence, I'm sure.

2008 Nov 25 08:23 AM

[Dan Jacome:]

HPQ as buyer has been out there since 2006 at least..

2008 Nov 26 10:25 AM