Smart phone maker Palm facing fight for survival
Sunday, 21 March 2010
NEW YORK, March 19 (Bloomberg): Palm Inc., maker of the Pre smartphone, fell the most in two years after predicting sales this quarter will be less than half of Wall Street estimates, prompting some analysts to question the company's viability.
Revenue in the period ending in May will be less than $150 million, Chief Financial Officer Doug Jeffries said yesterday on Palm's third-quarter conference call, compared with the $300 million average of estimates compiled by Bloomberg. The company also reported its 11th straight quarterly loss.
"Palm's troubles will only accelerate as carriers and suppliers increasingly question the company's solvency and withdraw their support," Peter Misek, a Canaccord Adams analyst in Toronto, said today in a note in which he cut Palm's price forecast to $0. "With what appears to be roughly 12 months of cash on hand, an accelerating burn rate, a complete lack of earnings visibility, and substantial debt and preferred equity, we no longer see any value in the company's common equity."
Derick Mains, a spokesman for Sunnyvale, California-based Palm, declined to comment on the report.
Analysts at Kaufman Bros. and Morgan Joseph reduced their recommendations on Palm's stock to "sell" from "hold" and expressed doubts about the company's future.
"We are unsure of Palm's prospects as an ongoing concern," Kaufman Bros. analyst Shaw Wu in San Francisco said today in a note to clients. He offered three scenarios for Palm's future, in which the company is sold, raises more capital or runs out of money.
"Everything depends on sell-through of products-revenue, cash burn, how much they need to invest in order to drive sales," Barclays Capital analyst Amir Rozwadowski in New York said today in an interview. In a note he predicted that "the company's cash burn will increasingly emerge as a concern."
Palm started selling updated versions of its Pre and Pixi smartphones at Verizon Wireless in January, competing with Research In Motion Ltd.'s BlackBerry and Motorola Inc.'s Droid, which runs on Google Inc.'s Android software. In the quarter ended in January, Android's share of the U.S. smartphone market more than doubled to 7.1 per cent, while Palm's fell to 5.7 per cent from 7.8 per cent, according to researcher ComScore Inc.
Revenue in the period ending in May will be less than $150 million, Chief Financial Officer Doug Jeffries said yesterday on Palm's third-quarter conference call, compared with the $300 million average of estimates compiled by Bloomberg. The company also reported its 11th straight quarterly loss.
"Palm's troubles will only accelerate as carriers and suppliers increasingly question the company's solvency and withdraw their support," Peter Misek, a Canaccord Adams analyst in Toronto, said today in a note in which he cut Palm's price forecast to $0. "With what appears to be roughly 12 months of cash on hand, an accelerating burn rate, a complete lack of earnings visibility, and substantial debt and preferred equity, we no longer see any value in the company's common equity."
Derick Mains, a spokesman for Sunnyvale, California-based Palm, declined to comment on the report.
Analysts at Kaufman Bros. and Morgan Joseph reduced their recommendations on Palm's stock to "sell" from "hold" and expressed doubts about the company's future.
"We are unsure of Palm's prospects as an ongoing concern," Kaufman Bros. analyst Shaw Wu in San Francisco said today in a note to clients. He offered three scenarios for Palm's future, in which the company is sold, raises more capital or runs out of money.
"Everything depends on sell-through of products-revenue, cash burn, how much they need to invest in order to drive sales," Barclays Capital analyst Amir Rozwadowski in New York said today in an interview. In a note he predicted that "the company's cash burn will increasingly emerge as a concern."
Palm started selling updated versions of its Pre and Pixi smartphones at Verizon Wireless in January, competing with Research In Motion Ltd.'s BlackBerry and Motorola Inc.'s Droid, which runs on Google Inc.'s Android software. In the quarter ended in January, Android's share of the U.S. smartphone market more than doubled to 7.1 per cent, while Palm's fell to 5.7 per cent from 7.8 per cent, according to researcher ComScore Inc.