Palm (NASDAQ: PALM), the failing smartphone company, has launched a new version of its Treo handset. According toThe Wall Street Journal, the new version of the product has newest Windows Mobile operating system, a GPS system and WiFi capability. It will run on the fast Sprint (NYSE: S) 3G network.
The new product is unlikely to help Palm, which trades at $5.42, down from a 52-week high of $19.23. For starters, the Treo will compete with another Sprint product, the well-regarded Samsung Instinct. The Apple (NASDAQ: AAPL) 3G iPhone is even more formidable competition. The fact that it sold one million units in its first three days on the market sucks a lot of demand for other products out of the market. And, why not throw in the RIM (NASDAQ: RIMM) BlackBerry.
Palm lost money last quarter. More importantly, the average price of its phones dropped sharply. Selling more handsets only helps so much when the yield-per-units is low.
The Treo may be a good product, but it comes into a crowded field that is already dominated by a few, very well-financed companies with more attractive offerings.
Apple Inc. (NASDAQ: AAPL) is opening its online App Store for iPhone software in a move some think is more important than the 3G iPhone launch on Friday. The App Store will let iPhone users choose from over 500 software applications to download, including games, educational programs, mobile commerce and business productivity tools.
In business, and specifically in technology, there are some people who live in the past and can't see beyond familiar and existing systems. Lucky for us, there are the true visionaries, those who innovate and take things further. Steve Jobs is one such visionary.
After seeing the success of Palm (NASDAQ: PALM) smartphones initially, and then the addictive-like relationship Research in Motion (NASDAQ: RIMM) BlackBerry owners have with their handsets, it is no wonder Apple could zero in on what consumers want and give it to them in an intuitive way. That has been Apple's mark all along.
Indeed, the Mac OS has always been touted as being the better operating system, and yet it is Microsoft (NASDAQ: MSFT) with its Windows OS that dominates the market. Many say that Jobs' was overprotective of the software, causing third-party developers to shy away. If that's the case, Jobs has learned his lesson and is amending his stance now with the iPhone software, hoping to achieve a new computing platform.
Oil was again the headline event today with the price per barrel near $142.00 and talk of $150.00 sooner rather than later. But all in all this day was far "less bad" than it could have been, especially if you consider the selloff yesterday, and consider that this was a Friday ahead of a shortened work week where traders are leery of holding positions. To top it off, the June quarter ends on this coming Monday.
The University of Michigan posted consumer confidence today at a 28-year low as inflationary pressures and fears remain high. The final June reading fell down to 56.4 from 59.8 in May and down from the prior June preliminary release of 56.7.
After hitting a one-year high of $19.23 in October, the stock hit a one-year low of $4.21 in March. This morning, PALM opened at $6.15. So far today the stock has hit a low of $5.79 and a high of $6.37. As of 12:40, PALM is trading at $5.85, down 69 cents (-10.6%). The chart for PALM looks bullish but deteriorating slightly, while S&P gives the stock a negative 2 STARS (out of 5) sell rating.
For a bearish hedged play on this stock, I would consider a November bear-call credit spread above the $7.50 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in five months as long as PALM is below $7.50 at November expiration. Palm would have to rise by more than 27% before we would start to lose money. Learn more about this type of trade here.
PALM hasn't been above $7.50 by more than a few cents since November and has shown resistance around $6.80 recently. This trade could be risky if the economy finds its footing, but even if that happens, this position could be protected by resistance PALM might find at its 200 day moving average, which is currently around $8 and falling.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in PALM or RIMM.
U.S. futures were mixed to lower early Friday morning, a day after stock markets sold off, ending at their lowest level in nearly two years. Still, with oil prices reaching another record in Asia, it's questionable whether stocks could indeed stage a recovery.
On Thursday, U.S. stocks sank to lows not seen in nearly two years after Goldman Sachs (NYSE: GS) downgraded investment banks including Citigroup (NYSE: C) and General Motors Corp. (NYSE: GM) to Sell and as Wall Street was also worried about the outlook for tech stocks as both RIM (NASDAQ: RIMM) and Oracle (NASDAQ: ORCL) reported quarterly results Wednesday, giving a tepid outlook. Topping it all were oil prices reaching $140 a barrel. The Dow Jones Industrial Average fell 358 points, or 3.03%, the S&P 500 lost 38 points, or 2.94%, and the Nasdaq Composite dropped 79 points, or 3.33%.
Usually, a day after such a selloff, buyers tend to come in, this morning we also woke up to news that oil prices climbed to a record above $141 a barrel in Asian trading, which may dampen the mood on Wall Street again. Light, sweet crude for August delivery rose as high as $141.71 a barrel before pulling back to $141.10. The previous trading record for a front-month contract was $139.89, set on June 16.
Many investors will say that the problems with the earnings report at Palm (NASDAQ: PALM) is that the company lost money and that revenue fell. That would be a naive view. The company's real trouble is that the amount it is getting per handset is falling sharply. Its newest product, the Centro, will not help because it is so inexpensive.
With the stock at $6, Palm's market cap is well below $1 billion. Its cash level has been falling and it only has about $250 million of liquid capital on its balance sheet.
Palm sold 968,000 handsets in the last quarter, up 29%. But revenue fell from $401 million to $296 million. That means that the yield-per-phone is so low that Palm may never be able to make money.
It the trend continues, Palm could be gone next year. According toReuters, "slowing sales of older phones such as the Treo offset strong sales of its new, cheaper Centro phone."
Reporting today: Palm Inc. (NASDAQ: PALM) is expected to post a loss of 22 cents a share in the fourth quarter. ConAgra Foods (NYSE: CAG) is expected to post earnings of 34 cents a share in the fourth-quarter .
Nike Inc. (NYSE: NKE) reported late Wednesday a rise in quarterly profit of 12% to $437.9 million, or 86 cents a share, helped by gains in Europe and Asia. Sales jumped 16% to $5.1 billion. The earnings beat Wall Street's forecast. Shares are down 4.8% in premarket trading.
Anheuser-Busch Cos. (NYSE: BUD) will likely officially reject InBev NV's $46.3 billion takeover bid this week and announce plans to lower $1 billion in costs, pay a special dividend and sell off divisions like its theme-park unit to increase its stock price. InBev may then raise its offer.
Anheuser-Busch Cos. (NYSE: BUD) is holding preliminary talks with rival Grupo Modelo SAB (Corona maker), according to The Wall Street Journal, in an attempt to thwart the $46 billion unsolicited offer it received Belgian brewer InBev SA.
Exxon Mobil (NYSE: XOM) said it plans to exit its U.S. retail gasoline business over the next few years, shedding the 820 service stations it still owns and operates and another 1,400 company-owned outlets operated by dealers of its branded fuels. Separately it also said it could spend more than $100 million for offshore oil exploration in the Philippines.
Tracinda Corp. on Friday said it will purchase 20 million shares of Ford's (NYSE: F) common stock in a tender offer at a purchase price of $8.50 per share, for a total purchase price of $170 million. That would increase billionaire Kirk Kerkorian, who controls Tracinda Corp., stake in Ford to 5.5%. Shares are up 2% in premarket trading.
Lehman Brothers (NYSE: LEH) shares may experience further volatility as there are reports Chief Executive Richard Fuld is looking for outside capital, possibly from a sovereign wealth fund or a U.S. investor. Meanwhile, speculation continues that after ousting CFO and COO Thursday, Fuld's days are numbered too. The Wall Street Journal says that Lehman "hopes to restore investor confidence by turning to a seasoned trading executive" such as new president McDade.
Palm (NASDAQ: PALM), the troubled smartphone company, is hoping that a new product, sold through Verizon Wireless, will help resurrect its fortunes. Not likely.
The company's Centro smartphone will go for $99. According toThe Wall Street Journal,the deal with the big carrier "will make the product available starting on Friday to Verizon's 67.2 million subscribers, with a two-year contract."
Good luck. According to research firm Changewave, a survey of IT professionals showed that most plan to buy RIM (NASDAQ: RIMM) Blackberries in the next quarter. Apple's (NASDAQ: AAPL) iPhone was second, and that was before the new 3G model was announced. Palm finished in last place.
Because the new iPhone has software which make it more useful to business people, the market for a smartphone from Palm is almost certain to be squeezed further. Palm has been losing money. It revenue last quarter was only $312 million.
Look around you. See all of those Blackberries and iPhones. No one is using a Palm
Douglas A. McIntyre is an editor at 247wallst.com and the author of the Ten Stocks Under $10 letter.
Palm (NASDAQ: PALM) is recently trading at $5.85. PALM is expected to report Q3 EPS in late June. PALM is expected to launch Centro and Treo 800 this summer. Elevation Partners has a 27% stake in the company. PALM's over all option implied volatility of 61 is near its 26-week average according to Track Data, suggesting non-directional risk.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
CBS Corp. (NYSE: CBS) announced Thursday it has signed a deal to buy CNet Networks Inc. (NASDAQ: CNET) for $11.50 a share in cash. CNet operates not only the CNET site, but also ZDNet, GameSpot.com, TV.com, mp3.com and others. The deal values CNet at about $1.8 billion and push CBS to among the 10 most popular Internet companies in the United States. CBS shares are down 2.9% in premarket trading while CNET shares are of course up over 42% to $11.31.
IAC/InterActiveCorp (NASDAQ: IACI)'s Ask.com has bought Lexico Publishing Group LLC, the parent of Dictionary.com, Thesaurus.com and Reference.com among other sites. Earlier this year, Lexico already agreed to be sold to Answers Corp (NASDAQ: ANSW), but the latter couldn't secure the necessary funds. Now, Lexico sold itself to Ask.com, for an undisclosed amount, although the number people are throwing around is $100 million. Could this acquisition help IACI gain -- even a little -- on market leader Google?
United Airlines (NASDAQ: UAUA) and Continental Airlines Inc. (NYSE: CAL), dropping ideas of a merger, are now talking about forming an alliance to still gain some benefits of working together. United appears relentless in its attempts to help its bottom line through a merger or an alliance. While talking to Continental about an alliance, it is still negotiating with US Airways Group (NYSE: LCC).
Citigroup upgraded Sina (NASDAQ:SINA) from "hold" to "buy" according toBriefing.com. The news service also reports that Tivo (NASDAQ:TIVO) was upgraded to "market perform" from "underperform" by Friedman Billings.
First Analysis Securities downgraded Cbiz (NYSE:CBZ) to "equal weight" from "overweight" according to the AP.
Douglas A. McIntyre is an editor at 247wallst.com.
U.S. futures were mixed to lower early Friday morning, a day after stock markets sold off, ending at their lowest level in nearly two years. Still, with oil prices reaching another record in Asia, it's questionable whether stocks could indeed stage a recovery.
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