The Game's Over for Palm

5/20 - "Although Palm (PALM) has released several new products and has a major platform redevelopment in the works, we believe that the company currently lags competitors with its dated product offering. The company faces increased competition with Apple's (AAPL) iPhone in the consumer market and Research in Motion (RIMM) in the enterprise market...reiterate our Sell rating and six-month price target of $4.00."

"We are also concerned that Motorola (MOT) will more aggressively enter the market for corporate email solutions given its acquisition of Palm's partner for corporate email, Good Technologies...Moreover, Palm's recently launched Centro has taken a toll on its margins."

6/5 - "We expect Palm to report its fiscal Q4:08 results (May 2008) in late June, with revenues of $284 million (5% below consensus) and non-GAAP EPS of ($0.24), 6 pennies below consensus...May will likely be another ugly quarter financially for Palm, but trends should only improve going forward. We believe a very low number of Treos were likely sold into the carrier channel in May as carriers drained legacy Treo inventory ahead of the refresh. We believe Centro growth continued unabated, and that a number of significant product launches are forthcoming."

"Our thesis on Palm has been that the company is only selling one compelling product currently (Centro) and that this product still has significant distribution that it has not yet tapped. As Centro distribution increases, and new Treos are introduced in the August quarter, revenues and profitability should improve. As this new Treo refresh continues in November, revenues and profitability should improve again. Finally, as a new high-end consumer platform, new operating system, and refreshed Centros are launched in 1H:09 (calendar), revenues and profitability should continue to improve yet again."

"We assume investors have largely written-off near term results for Palm, so we are not especially worried about our estimates being below consensus expectations as long as the timing of the new product launches remains consistent. We continue to view PALM shares as having an extremely compelling risk/reward profile, especially now that the worst of the financial results should be behind the company. The smarthpone market is just now becoming mainstream in the U.S., and it is clear that Palm has the brand and distribution to capture a much greater share of the handset market as its product portfolio expands and improves. We continue to rate shares of PALM at Outperform/Speculative."

6/6 - "We are maintaining our Neutral rating...Our estimate of $(0.26) for FY09 (May) compares with the analyst consensus of $(0.21). The highest analyst estimate for FY09 is $0.15, which translates into a P/E multiple of 48x, a fairly high multiple for a stock with a debt-to-capital ratio of 50%. Palm has a relatively large short position of 35 million shares, which probably adds to share price volatility."

"We believe sales of the Palm Centro remain solid at Sprint (S: NR-$9.20), but that sales of the older Treo models, including the Treo 700wx at Verizon (VZ: NR-$38.96) and Sprint, and the Treo 680 at AT&T (T: NR-$39.46), continued to slow. In addition, Vodafone (VOD: NR-$31.51) appears to be deemphasizing the Treo 500v."

"Furthermore, the competition is expected to heat up in the next several months with new entries from Research In Motion, Samsung (005930 KS: NR- 709,000 KRW), and Apple. For example, the new Samsung Instinct will be available at Sprint on June 20...It is widely anticipated that a new 3G version of the Apple iPhone will be announced on Monday at the Apple Developers Conference...We expect that Research In Motion could launch as many as four new BlackBerry models by year-end. Two of the models have already been announced."