Palm downgraded due to intensifying competition

[Alexander Turcic]

In case you are wondering why Palm is down today while the whole market is up - Palm was lowered to "underperform" from "peer perform" by Bear Stearns & Co. analyst Andrew Neff. The downgrade reflects "concerns about intensifying competition and potential for increasing pricing pressures," Neff wrote in a note, following Motorola Inc's announcement yesterday that the world's second-largest maker of mobile phones will release its Q phone and e-mail device on May 31.

Neff also cut his estimate for fiscal 2007 profit, after options expense, to 62 cents a share from 73 cents on the increased competition.

Disclaimer: I hold Palm stock in my portfolio.

[TadW]

It's obvious why Mr Neff is bitter about Palm. The following is from an article that appeared in the New York Times in August 2001:

LAST Dec. 5, Andrew J. Neff, a computer analyst at Bear, Stearns, issued a report extolling the virtues of Palm Inc., the maker of hand-held computers. After meeting with Palm’s management, Mr. Neff had come away a believer in the company’s future and its battered shares. With the stock near $44, Palm was well below its March 2000 peak of $165, reached on its first day of trading. He put a 12-month price target of $80 on the shares, reflecting his belief that they would trade at 19 times his 2001 sales estimate for the company.

By the next week, Palm shares had climbed to $56.625. But then they began to sink, until, on Jan. 3, they had reached $27.88. That day, Mr. Neff cut his target to a range of $37 to $48. Two months later, with Palm in the mid-teens, Mr. Neff lowered his target again. Finally, on May 17, the shares stood at $7.05 when he slashed his target to around $5. It closed on Friday at $5.36.

Never trust the word of a financial analyst who's been so dead wrong the first time.

[Pride Of Lions]

Yeah, financial analysis is the new goat-entrail prognosticating, but the point remains: Palm only has one product, and has ever since the HandSpring merger (the beginning of the end I felt at the time.) Sure, there are a couple of non-converged handsets from Palm, but their entire focus has been and continues to be the Treo. What's going to happen when everyone who wants one has one?

I'll be happy when OS X supports virtualization, because with the lack of good handhelds from Palm, I'm feeling like it's a PPC world going forward.