The annual Consumer Electronics Show (CES) in Las Vegas was last week. In past years, just the anticipation of the world's largest electronics trade show was enough move technology stocks higher.
That was not the case this year, though, as investors grapple with a weak economy, frozen credit, plunging home values and rising unemployment. Just paying the bills and keeping one's head above water seems to be the order of the day. The market sold off hard last week, and not even the CES could pull it out of its funk. Still, there were some bright spots.
Palm, Inc. (NASDAQ: PALM) gave its investors a taste of the old days as its shares soared 34% after its new touch-screen phone and mobile operating system garnered admiration from analysts and attendees at the CES.
The new smartphone, dubbed Pre, emerges as a serious competitor to Apple, Inc.'s (NASDAQ: AAPL) iPhone and Research In Motion's (NASDAQ: RIMM) BlackBerry.
One analyst said the new offering from Palm appears "elegant, intuitive, sufficiently differentiated and ... a legitimate competitor to the iPhone."
Palm was a pioneer in the market for handheld digital assistants. Its stock, once a high-flier in the heyday of tech, has fallen on hard times as the BlackBerry and the iPhone became big hits with consumers. Palm became an afterthought with investors, its stock left for dead.
Part of the big rally in the shares last week was no doubt related to investors looking to buy shares to cover short positions. According to Yahoo Finance, some 38 million shares had been sold short as of Dec. 10, 2008.
These short-squeezes can ignite powerful rallies as a flood of buyers comes into the market at one time as short-sellers seek to mitigate their losses.
As for the Pre, it comes loaded with features including Wi-Fi, stereo Bluetooth and GPS, 8 gigabytes of storage space, a 3-megapixel camera, and music and video playback. The face is dominated by a 3.1-inch touch-screen. Its sensors will rotate the images on the screen when the device is turned on its side. And a full keyboard slides out from the bottom.
The Pre comes with its own new operating system, Palm webOS, which is meant to connect various applications. It becomes available in the second half of the year and will use Sprint/Nextel's (NYSE: S) wireless network exclusively.
Palm also introduced a new wireless charger for the Pre called the Touchstone. All you have to do is place the Pre on top of it and it gets charged via induction.
Palm CEO Ed Colligan said the new gadget and operating system had been in the works "more than a couple years," and represents "a complete reinvigoration of the company."
At this early stage, most agree that the Pre is a slick little device but does little to differentiate itself, and that Palm really hasn't raised the smartphone bar much at all, despite Mr. Colligan's claim that it's a "significantly better product."
Though a price wasn't announced, Mr. Colligan seems to be leaning in the direction that it will be north of $200. That may be too high to take market share from Apple or Research In Motion.
Considering that Palm had the spotlight, the jury is out on whether this rally is sustainable.
Louis Navellier's PortfolioGrader Pro, which offers free ratings for nearly 5,000 Wall Street stocks, rates PALM a C or Hold. I suspect it will take a sequence of impressive operating results to improve the rating.
Jamie Dlugosch is a contributor to OptionsZone.com.
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