Will the Palm Pre Make It Out of the Starting Gate?

By John Biggs

Collins Stewart analyst Ashok Kumar (not this guy) is claiming that the Palm Pre will be a dud and that shortages, manufacturing problems, and Sprint’s relative suckitude as a carrier will push the $199 smartphone straight to the bottom.

While I welcome this bracing opinion of everyone’s darling, it seems Kumar has some sort of bone to pick and is bringing up concerns you could have for any phone, including the iPhone. He writes:

Collins Stewart analyst Ashok Kumar claims that his supply chain checks indicate that Palm has “drastically reduced its production orders” for the Pre. Kumar says “multiple hardware and software issues” have forced Palm’s hand here and that he doesn’t expect the company to meet its expected goal of one million units shipped in the second half of 2009. He even goes so far as to describe that figure as “highly unrealistic.”

“Multiple issues” affecting a production run of 1 million? Unless those issues were Yeti invading Palm’s OEM factories in Taipei, I’m fairly certain a company like Palm can dump out a million phones. He also points out that Sprint (S) is losing customers and that AT&T (T) and Verizon (VZ) customers probably won’t switch to Sprint. OK. This I can stand behind. Verizon owns the world on “coverage,” or at least the public’s perception of coverage, and AT&T owns the iPhone, so it will be a tough sell. We can probably expect a migration - unless the Mini-Pre pops up - to happen about a year after the Pre is launched and consumers come to understand the value of the new OS.

Not to go all fanboy, but the Palm Pre is a compelling phone. Unless they completely fail in manufacturing, they can’t do much to break the momentum they’ve thus far gained.

Original post

Comments

[bluemarlin1402:]

What part of VAPOR WARE is hard for you to understand and what do you mean by "break the momentum"? They haven't sold ONE phone. What type of momentum is that? As a company engaged in the business of making a profit, I don't believe $0 in sales is a target most would like to hit.

You comment about "bringing up concerns you could have with for any phone, including the iphone" is equally ludicrous. The iphone is NOT "drastically reducing it's production orders" and does not "have multiple hardware and software issues" in fact, the exact opposite is true, it just works.

You seem to mock the "multiple issues affecting a production run of 1 million". If there are hardware and software issues it doesn't matter if they produce 1 or 1 million, the phone has problems. You're confusing manufacturing issues with having a stable, ready to release phone.

Your article is based on false conjecture and does not offer any support for its reasoning.

May 01 11:52 AM

[another.ana...:]

Palm will bring out the Pre.
If it is successful enough Palm will be bought by Dell, MSFT, or some other tech company that wants ti try its hand in cell phones & wants instant market presence.

If it not successful enough Palm will bring out the Chapter 11 device.

Ayuh

May 01 01:46 PM

[H.J. Huneycutt:]

What tech company in their right mind would want to buy out PALM at over $15+ a share?

(Mind you, it's trading at $11+ right now, but in order to buy out the company, someone's going to have to pay a premium).


On May 01 01:46 PM another.anal.ist wrote:

> Palm will bring out the Pre.
> If it is successful enough Palm will be bought by Dell, MSFT, or
> some other tech company that wants ti try its hand in cell phones
> & wants instant market presence.
>
> If it not successful enough Palm will bring out the Chapter 11 device.
>
>
> Ayuh

May 01 01:58 PM

[another.ana...:]

H J Huneycutt:

I quite agree with you that paying $15++ for Palm is NOT a good corporate move.
However, neither MSFT's "Monkey Boy" Ballmer or Dell's "Turn Out The Lights & Give the Shareholders Back Their Money" Mikie Dell have shown any Rocket Science smarts in running their respective companies in the last few years. Lots of CEO's equate big buy-outs with brilliance instead of fear that it won't work & the buyer will waste money & market position. Look at Time Warner/AOL for example.
You don't see AAPL making company transforming buy-outs; if you do sell any AAPL shares you may have because disaster this way comes.

Ayuh

May 01 02:19 PM

[Chris Lau:]

There are already rumors the Eos is coming out @ $99. Pre isn't even out yet and they're already talking about a cheaper "better" model.

May 01 02:32 PM

[H.J. Huneycutt:]

another.anal.ist,

I think that might have been true back in 2004 or 2007, but in 2009, it's a totally different environment. Given PALM's heavy debt load and cash flows that have not been all that historically impressive, I don't see how any corporation can justify spending $15+ per share on PALM. DELL has enough liabilities as it is, so I'm not even sure how they would afford it. MSFT could, but I think they'd rather develop their own stuff or find some other way to mimic PALM, as opposed to buying PALM at an exboritant price.


On May 01 02:19 PM another.anal.ist wrote:

> H J Huneycutt:
>
> I quite agree with you that paying $15++ for Palm is NOT a good corporate
> move.
> However, neither MSFT's "Monkey Boy" Ballmer or Dell's "Turn Out
> The Lights & Give the Shareholders Back Their Money" Mikie Dell
> have shown any Rocket Science smarts in running their respective
> companies in the last few years. Lots of CEO's equate big buy-outs
> with brilliance instead of fear that it won't work & the buyer
> will waste money & market position. Look at Time Warner/AOL for
> example.
> You don't see AAPL making company transforming buy-outs; if you do
> sell any AAPL shares you may have because disaster this way comes.
>
>
> Ayuh

May 01 09:16 PM

[Paul Harper:]

thansk for reminding me to look at putting in a short on Monday open ... $11.00 ? ... Crazy.

Who is going to be buying the Pre ? Certainly not corporate accounts who have a freeze on. Also, I would love to see a comms manager get this past his CFO "we want buy 3,000 handsets from a company that is struggling to survive & may go Chapter 11 before the end of the year"
Palm has too much "fail" about it.


On May 01 01:58 PM H.J. Huneycutt wrote:

> What tech company in their right mind would want to buy out PALM
> at over $15+ a share?
>
> (Mind you, it's trading at $11+ right now, but in order to buy out
> the company, someone's going to have to pay a premium).

May 02 10:46 AM

[mollytjm:]

i had to laugh about microsoft preferring to build it's own smartphone rather than buying Palm. what has it built lately that actually worked well and succeeded? they can barely churn out software in a timely fashion and they've never been successful with hardware.
But i don't think they'll want Palm either.
Businesses know that the blackberry and iphone are here to stay awhile...there would be no reason to buy the Pre when they have other reliable (in terms of the company making them) products to choose from.
I can see Palm users upgrading to the Pre... but that's about it.
Long APPL

May 02 11:20 AM