For Palm (NASDAQ: PALM), the future is really about one product: the Pre smartphone. And based on the latest quarterly report, it looks like things are going fairly well (the device was launched in June).
In fiscal Q1, Palm sustained a net loss of $161.1 million, or $1.17 per share. However, if you exclude certain items, the result was a loss of $13.6 million, or $0.10. This was much better than the Street's consensus of $0.24.
In the quarter, Palm shipped 823,000 smartphones, the bulk of which were Pre devices. Again, this was a nice surprise for investors.
For the most part, the Pre is worthy competitor -- in terms of features and pricing -- especially against Apple (NASDAQ: APPL) and RIM (NASDAQ: RIMM). If anything, Palm is getting a lift from the megatrend towards smartphones. In fact, it looks like the Pre is also getting some traction in the corporate market.
Yet, to make headway, Palm will need to spend some serious dollars on marketing and distribution. So, it should be no surprise that the company plans to issue 16 million shares in a secondary offering.
However, this will be dilutive. And so far in today's trading, Palm's shares are off 4% to $13.85.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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Reader Comments (Page 1 of 1)
9-18-2009 @ 11:57AM
Beltway Greg said...
Essentially the dilutive effect is somewhere on the order of 12% of an already grossly overvalued stock. A fund is propping it up. (Elevation Partners?) Here's the problem for Palm, essentially a de facto subsidiary of Apple, and most likely the reason why they aren't releasing a great deal of information. How many people do you believe will actually switch from RIMM or Apple?
The Pre, Amazon's Kindle, and the soon-to-be-released and poorly named Pixi are for older people and folks that were happy with Treos. Sure .01 is greater than -.01 but it isn't fantastic. Some things Palm can't steal from Apple. The next Apple earning conference call should include comments on royalty payments from Palm and rent on their former employees.
9-18-2009 @ 1:07PM
Beltway Greg said...
And yes that includes Mr. Vertigo himself Bono. I have to wonder how much of a push Palm put behind the marketing of U2's new release No Sales on the Horizon
or is that No Line on the Horizon? Seems to me Apple put a disproportionate amount of free promo into your previous releases. I guess they learned the old adage the hard way, "It's easy to work in a restaurant but it's hard to own one."
9-18-2009 @ 2:49PM
e.krabs said...
I'm a long-time user of Palm products, starting out with the monochrome Palm III. Until recently, Palm has always had a place by my side and in my heart, but I admit I am also bearish with this stock right now.
The Pre is Palm's last ditch, all-or-nothing effort to get their foot back into the smartphone game, but unlike the last time, they are now fighting from a disadvantaged position against RIM and Apple.
Certainly, there was a great trade to be had if one could get in when news the Pre broke out. Now? I don't know if I would go so far as to say that one should short it, but.... I don't see any particular upside potential in either the technology or the business itself, so... I personally wouldn't get in on this trade.
9-20-2009 @ 12:11PM
Typical Engadget Tech-Nerd said...
I doubt if there is any room for Palm in the smartphone market. Nokia, Apple and RIM are the big players and there is only a couple of percent share left for Palm. Not even sure that's enough for Palm to survive let alone thrive.
http://stats.getjar.com/statistics/world/manufacturer/Palm
They might as well just go into some other business or sell their webOS to smaller companies which is their best bet. That's what Palm gets for slacking off so many years the same as Motorola did. Resting on laurels is a prelude to failure.