Palm: Worth Holding On To - Barron's

Palm (PALM) shares opened down 18% Friday after the company preannounced a FQ2 loss, said Treo 755 handsets were behind schedule, and warned of higher-than-expected warranty costs (full story). Barron's Mark Veverka says despite the Street's disappointment, shares may be worth holding, as a recent cash infusion "may launch Palm into the smartphone big leagues." On Friday, shares rebounded 6% after Morgan Keegan analyst Tavis McCourt said shipments of Palm smartphones using Windows Mobile OS (and not its own) have grown faster than total Windows Mobile shipments over the past half year, indicating Palm may be making inroads with corporate users that look for Windows integration -- a market previously dominated by Research In Motion (RIMM). He says Palm's new $100 Centro is "selling like hotcakes."

In October, private investment firm Elevation Partners took a 27% stake in the company in exchange for a $325 million investment in order to allow the company to "invest in products and operational expertise so that Palm could participate fully in the growth opportunity of smartphones." Palm board member Roger McNamee said Thursday's miss was expected, since Elevation's long-term strategy is in its initial stages. "You won't even see it in the numbers for awhile, but the company is off to a great start," he says.

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Comments

[Lisa]

Palm now has to contend with Apple as well as Rimm. I wouldn't bet on them surviving against the competition.

[HermanManfred]

There has been no "cash infusion" and perpetuating that myth is simply irresponsible - shame on the article author, SeekingAlpha, and Barron's for getting it SO wrong yet again.

Palm =had= $600+ million in cash before Elevation gave them another $300+ million. Palm promptly (same moment) turned around and gave away $900+ million in cash, went into debt for $400+ million and now have maybe $200 million in cash left.

So tell us - how does going from no debt and $600+ million in cash to $400+ million of debt and about $200 million in cash in any way, shape, or form qualify for the term "cash infusion"?

[simenwu]

I don't see any future in Palm even though it's going through a restructure now. It's position in the SmartPhone market is a little bit awkward.

It's not capable to compete with RIM and Apple. Both RIM and Apple provide software and service (which Palm doesn't have) besides the hardware. It is just hardware manufacturer. That means it has a long list of opponents such as LG, Samsung, Sony, etc. And I'm sure there will be Chinese players in the market soon. I'm pretty sketical whether Palm can survive in such a crowded market.

It may end up being taken over by some big predators. In that sense, maybe it is still worth investing.