MikeCooper

Palm Pre: Assessing the Risks

I bought a small position in PALM just before Pre was unveiled, thinking the stock would show a little bump at the end of the presentation, and I would sell and make a quick profit. I bought at $3.30 and sold at $5.15, doing much better then I thought. Anyone who has been watching this stock knows what I missed out on.

But I don't regret it. There is nothing but air and enthusiasm propping this stock up. Yet that appears to be enough. I won't be putting money back in it anytime soon. But I also won't believe any analyst who predicts dark clouds ahead for PALM. Financial analysis does not seem to apply to it. Gravity does not seem to apply to it! PALM is the ultimate "watch from a distance and marvel" stock right now.

Four Dying Silicon Valley Companies

I absolutely disagree with your assessment of PALM. Just because they are not likely to be the trend makers again anytime soon does not mean they are dead. Are Samsung, Ericcson and HTC going to fail in the smart phone market just because there products are considered second tier?

This is an absolute virgin market. Mobile broadband and web 2.0 will usher in the post-laptop world with a vengeance. PALM has made all sorts of ridiculous mistakes in the past but their managment has since changed and their development team is highly credible. They are about to deploy a new OS, they are a primary vendor of Windows Mobile (not great, but alright and not going anywhere) in the enterprise market, and their Centro line dominates the low end. Add to that the ridiculously loyal following they have for their legacy PDAs (including me), and it is clear they have a shot.

Its a risky stock certainly. But they have a good plan and they are executing on it. That is the bottom line that separates them other companies you mentioned like Sun or Yahoo, who are still searching for a business strategy.

Palm's Time May Have Passed

Let me be the contrarian and say I believe this is a good time to invest in Palm. Three reasons:

1. Despite the disasters you name Palm still owns 10-13% of the market. It continues to have strong brand and a following so loyal they will wait almost a decade for a product that promises to barely match what's out there now. Never count a company like that out.

2. Palm is absolutely winning the price battle. The centro is the ONLY smart phone out there affordable purely on its merits. What I mean by that is that it sets a reasonable price for a phone that delivers voice, email and internet services. With RIM or Apple you are paying $200-$300.00 extra for a bit more elegance and big heap of vanity (oooh you have an IPhone, you're a player aren't you?).

This point is important because the smart phone market continues to be a virgin one. Right now it is largely a vanity market. But as internet access becomes more a necessity, and WiMax or LTE becomes ubiquitous, you're going to see a second wave of consumers looking for these services for their own sake. For these consumers, Palm is well-positioned.

3. Buyout possibilities. Palm has always been the subject of buyout speculation. However there large market capitalization and declining market share has traditionally made Palm an expensive and risky proposition. The present financial crisis as largely solved that problem. Palm today would be a reasonable if still large takeover target for a company still looking to jumpstart itself as a player in the post-laptop, broadband world that is upon us. Recall how much Microsoft was prepared to pay for Yahoo. Yahoo's share of the search market and Palm present share of the smart phone business is roughly equivalent.