Major Palm investor urges sale of the company

Alexander Turcic · 02-02-2006, 05:56 AM

Palm investor Mark Nelson, who owns 6.6 8 percent of the Treo mobile phone maker, wrote to the board urging them to consider selling the company, the Wall Street Journal is reporting today, without saying where it got the information.

Mr. Nelson praised Palm's management in his letter, but he said the company is in a competitive market that faces "slowing innovation, commoditization and choked margins." As a result, Mr. Nelson wrote, Palm should "explore strategic alternatives, including a sale of the company." ... In his letter, Mr. Nelson acknowledges the rising share price of Palm and says the company is "in the ascendant." But he argues that Palm, which is one of the smallest players in a cutthroat cellphone market that is dominated by giants like Nokia Corp., faces such intense competition and likely commoditization that these "overwhelming market forces will render insignificant steps this [Palm] or any management can take."

Nelson bought into Palm in early 2004 when the stock was trading at around $10 a share. The stock has recently traded at around $40.

This is not the first time a Palm investor had tried to run for the money. In November 2005, the Swiss hedge fund company Sagio Investments SA, which owns roughly 5 percent of Palm, wrote to the board complaining about the lagging company's stock price at the time.

Related: Palm stock surges after takeover chatter, Palm is cheap, says investor, Palm investment shark shows its teeth

Alexander Turcic · 02-02-2006, 01:39 PM

Not directly related but closely followed, research house Matrix Investment Research downgraded Palm from "Buy" to "Hold" today and sent the following note to their clients:

PALM's performance remains strong and should continue with the strength of Treo sales and the good acceptance of the new Windows Mobile based Treo but current valuation is starting to fully reflect this and near term, gains in the stock price may be limited with the lack of any other near term catalyst.
PRVit Value drivers remain strong but now are fully valued relative to PALM's Value Score
EVA Momentum at 5.3% is very strong.
PALM has a very strong balance sheet with $8.09 in Excess Cash per Share and no debt.
PALM is trading at a very small 12% discount to our intrinsic value calculation of $44.00 per share. The EV/EBITDAR multiple of 16.3X is 25% above the sector mean of 13X.
We feel the recent run up in share price represents a good opportunity to take profits.
Downgrade From Buy to Hold.

Bob Russell · 02-02-2006, 04:21 PM

Hmmm. I wonder if what that analyst really means is that he read Mr Nelson's letter and has had second thoughts!

02-02-2006, 05:56 AM	#1
Alexander Turcic Fully Converged Posts: 18,175 Karma: 14021202 Join Date: Oct 2002 Location: Switzerland Device: Too many to count here.	Major Palm investor urges sale of the company Palm investor Mark Nelson, who owns 6.6 8 percent of the Treo mobile phone maker, wrote to the board urging them to consider selling the company, the Wall Street Journal is reporting today, without saying where it got the information. Mr. Nelson praised Palm's management in his letter, but he said the company is in a competitive market that faces "slowing innovation, commoditization and choked margins." As a result, Mr. Nelson wrote, Palm should "explore strategic alternatives, including a sale of the company." ... In his letter, Mr. Nelson acknowledges the rising share price of Palm and says the company is "in the ascendant." But he argues that Palm, which is one of the smallest players in a cutthroat cellphone market that is dominated by giants like Nokia Corp., faces such intense competition and likely commoditization that these "overwhelming market forces will render insignificant steps this [Palm] or any management can take." Nelson bought into Palm in early 2004 when the stock was trading at around $10 a share. The stock has recently traded at around $40. This is not the first time a Palm investor had tried to run for the money. In November 2005, the Swiss hedge fund company Sagio Investments SA, which owns roughly 5 percent of Palm, wrote to the board complaining about the lagging company's stock price at the time. Related: Palm stock surges after takeover chatter, Palm is cheap, says investor, Palm investment shark shows its teeth

02-02-2006, 01:39 PM	#2
Alexander Turcic Fully Converged Posts: 18,175 Karma: 14021202 Join Date: Oct 2002 Location: Switzerland Device: Too many to count here.	Not directly related but closely followed, research house Matrix Investment Research downgraded Palm from "Buy" to "Hold" today and sent the following note to their clients: PALM's performance remains strong and should continue with the strength of Treo sales and the good acceptance of the new Windows Mobile based Treo but current valuation is starting to fully reflect this and near term, gains in the stock price may be limited with the lack of any other near term catalyst. PRVit Value drivers remain strong but now are fully valued relative to PALM's Value Score EVA Momentum at 5.3% is very strong. PALM has a very strong balance sheet with $8.09 in Excess Cash per Share and no debt. PALM is trading at a very small 12% discount to our intrinsic value calculation of $44.00 per share. The EV/EBITDAR multiple of 16.3X is 25% above the sector mean of 13X. We feel the recent run up in share price represents a good opportunity to take profits. Downgrade From Buy to Hold.

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02-02-2006, 04:21 PM	#3
Bob Russell Recovering Gadget Addict Posts: 5,381 Karma: 676161 Join Date: May 2004 Location: Pittsburgh, PA Device: iPad	Hmmm. I wonder if what that analyst really means is that he read Mr Nelson's letter and has had second thoughts!

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