Palm's Time May Have Passed

by: Sam Diaz December 02, 2008 | about stocks: AAPL / GOOG / PALM / RIMM    

Sam Diaz

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Remember when Palm - maker of the Pilot and Tungsten PDAs and later the Treo smartphone - was the dominant player in the handheld device business? Today, it’s a completely different landscape. Apple’s iPhone has recently dominated the smartphone space. RIM is making a big push with the launch of consumer-friendly versions of the Blackberry. And Google (GOOG) has now entered the space with its Android operating system and the G1 device for T-Mobile. For Palm (PALM), pretty much a minor player these days, the future doesn’t look so hot.

Monday, the company announced preliminary results for its second quarter 2009, which ended Nov. 28. The short story: cutbacks galore - jobs in the U.S., operations in Europe and sales operations in Asia Pacific will head back to the U.S. The company said that, by the fourth quarter, expenses should be trimmed by $20 million from the Q1 levels.

The company said second-quarter revenue will be $190 million to $195 million, a significant drop from the $349.6 million a year ago. The company said the revenue drop is due to “reduced demand for maturing smartphone and handheld products” but went on to note that it is seeing “unprecedented dynamics in the global markets as economic uncertainty hampers demand for consumer products.” Basically, the overall economy is hurting Palm, too.

A year ago, CEO Ed Colligan told investors that executives were “transforming Palm to exploit the market opportunity,” Then, just last quarter, in a presentation during its first quarter earnings call, the company said one of its transformational goals was to “establish Palm as the leading innovator in the smartphone marketplace.”

Given the buzz that’s been generated around the iPhone, the G1 and the BlackBerry, I think it’s fair to say that Palm has failed. The other devices, while fun to touch and interact with, were also innovative - delivering a touch screen experience, as well as a large number of apps and other mobile web features that kept both consumers and developers intrigued.

Shares of Palm were down more than 21 percent in regular trading Monday, closing at $1.88. The stock continued its downward slide in after-hours trading, dropping almost 10 percent more to $1.70.

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This article has 6 comments:

  •  
    Dec 02 11:40 AM
    Same old story: bad management killed a company with great products.
    Reply | Link to Comment
  •  
    Dec 02 12:50 PM
    sad... i like palm, quite nifty devices... i'm still using my tungsten e2, mostly for book reading, occasionally to check my emails. works like a charm. and at a fraction of the iphone price... :)
    Reply | Link to Comment
  •  
    Dec 02 01:40 PM
    Right. Palm did nothing to keep up with the innovative smart phone market. Its a moving market, and if your company isn't progressing with it of course you're going to lose. Sentiment is bearish for this company (predictwallstreet.com/...) not surprisingly. Consumers don't care about Palm when they have iPhones and Blackberry's to choose from. As long as sentiment stays down, it's gonna keep the price bogged down with it.
    Reply | Link to Comment
  •  
    Dec 03 09:00 AM
    "May have passed"? Understatement of the month, man! Palm OS wasn't looking too healthy 5 years ago, and now they have actual COMPETITION (the iPhone/iPod Touch), and from the only company that seems to be able to actually DELIVER user-friendly, powerful computers/CE devices (as opposed to a certain big company that ALWAYS promises the next version will be usable/secure/stable). Anyone who's bought Palm stock, in recent years has been a wild-eyed optimist, and anyone who's bought it since the iPhone is an idiot who has failed to notice the large wooden stake driven through Palm's corpse.
    Reply | Link to Comment
  •  
    Dec 03 10:24 AM
    it is sad when a company delivers a unique product that's successful, and then fails to innovate enough to keep ahead of the game. even Martha Stewart changes designs and that's just sheets! in technology, the failure to constantly innovate is just plain failure.
    Reply | Link to Comment
  •  
    Dec 03 01:04 PM
    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.
    Reply | Link to Comment
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