Palm: Worth Holding On To - Barron's

Dec. 9.07 | About: Palm, Inc. (PALM)

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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