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Palm Inc (NASDAQ: PALM), the California-based smartphone developer, has pulled its recently released Foleo product line, as it had turned out to be a big flop.Now investors need to ask how they are going to make money in this stock. Is selling out to Motorola Inc (NYSE: MOT) or another handset manufacturer the only way? Despite a reasonably passionate following by Treo users, with many claiming the merits of the Palm produced device over that of the Blackberry produced by Research-in-Motion Limited (NASDAQ: RIMM), Treo just has not gotten enough of a following, as it failed to take the enterprise approach that Research-in-Motion took.
Further, as functionality improves and wireless networks are able to handle more capacity, low-end devices will be able to better handle data, making it even more difficult for Palm to bring new products to market.
All told, Palm is looking more like a value trap than a value stock. While management has done an excellent job improving its balance sheet and increasing its cash generation, this is one company that is now in desperate need of a new product, which looks like it could take a while. If you are buying Palm, you are betting on a buyout at this stage of the game.
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