Not Eating Out of Palm's Hand[-helds] Until 2010

Barron’s’ Tiernan Ray wrote Wednesday that both Palm (PALM) and Intel (INTC) have a lot riding on the success of the annual Las Vegas consumer electronics show opening this week. Palm’s situation is worse than Intel (the article was written before Intel's earnings disappointment announcement today, Wednesday.)

Yet Barron’s writes that the new operating system that Palm plans to unveil is what the company believes will make it profitable again:

For Palm, the unveiling of a new operating system on Thursday, dubbed "Nova," is a make-or-break, do-or-die event, and it still may not be enough. Palm, with deep losses expected this year, has over half of its shares sold short, notes analyst Larry Harris with boutique research firm CL King. If you think that means the stock is primed for a rebound at a recent price of $3.69, think again: The stock recently traded as low as $1.14.

But it's actually Palm that throws cold water on the hope that things will turn around soon. On its FQ209 conference call, Palm says the company is revitalizing with a new line, but that investors should not expect anything too great from the company until fiscal 2010:

We understand that a pipeline of new products is necessary to maintain momentum and we’ll soon be replacing our aging product line with our next generation products. Until then, we’ll have a few rough months ahead but we are optimistic that as we enter fiscal 2010, we’ll see the success of our new products positively impact our income statement.

In the meantime, we think the best thing we can do for our company and our shareholders is to maintain discipline and continue to execute against the long range strategic plan we’ve established.

I was commenting more that we will return to profitability in ‘010. I’m not going to give a specific quarter or timeframe there. I just think as we gain momentum on our new product shipments, I think one of the things we’ve done is put our expense structure in a position where we can return to profitability more quickly. But that being said, we’re going to invest in the marketing and selling of these products to build our market position to gain momentum. We really believe it’s a long-term play here and that we don’t want to -- we want to manage that level of profitability and really make sure we’re investing appropriately in future products and in the necessary marketing to really gain a strong position in the marketplace.

Comments

[Yagottabe K...:]

Fiscal 2010 fpr Palm begins 2/3-year calendar 2009.

I think Palm has a much larger hurdle to leap than mere time, though.

Jan 07 04:46 PM

[Medici:]

The Market Is Anticipatory, thus the prospects of something new and decent from Palm tied to its name recognition may bump the stock price over time, there are large barriers to entry for anyone even to get into the smartphone business so Palm may become a target in lieu of any potential success.

Jan 07 07:34 PM

[SolarView:]

What does Medici mean about barriers "to get into the smartphone business"? Palm invented the smartphone with the Treo models. We can only hope they become a target due to future success, but they certainly aren't starting from scratch. While Palm has made some poor business decisions in the past, they have had great and industry-leading products. I can't wait to see what they roll out at CES 2009!

Jan 07 11:26 PM

[Zoltan L. K...:]

"investors should not expect anything too great from the company until fiscal 2010" and probably nothing, either big or small, afterwards.

Jan 08 02:26 PM