Wednesday, April 1, 2009

Bloomberg: Palm (PALM) Pre May not Match Apple (AAPL) Iphone Debut as Economy Flags

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This headline from Bloomberg is a bit deceiving because there was no chance for the Palm Pre to match the cult that is Apple. That said, since the Pre made its glitzy debut [Jan 9: Obama Sighted with Palm Pre in His Hand Yesterday] I have been intrigued by a "long shot" (more speculative) investment in Palm (PALM) or even by proxy Sprint (S) - both are sub $10 stocks who could see some substantial upside (especially the former) if Pre becomes a big hit. But that darn economy....

...in this celebrity worship society, if I were Palm, I'd be paying every major celebrity from rap stars to actors to comedians to be toting their new Pre around. Oooohh... must be cooler than my Blackberry Curve if Snoop loves his Pre!

Via Bloomberg
  • Palm Inc., whose stock has doubled this year on the buzz over its new Pre phone, may sell less than half as many devices as Apple Inc.’s iPhone did in its debut.
  • The Pre wowed visitors at the Consumer Electronics Show in Las Vegas this January with its WebOS operating system and wireless charger, winning the event’s top honor and pushing the stock up more than 80 percent over two days. Palm may ship 2.6 million in the first year, according to the median estimate of 10 analysts surveyed by Bloomberg.
  • Apple sold 6.1 million iPhones in the year after the 2007 debut, before the worst economic slump in a quarter-century sapped consumer spending. Palm, whose sales fell 71 percent last quarter, has neither the base of Apple devotees from which to draw nor the BlackBerry’s niche in the corporate world, said Andy Bateman, who leads the New York office of Interbrand.
  • “What the BlackBerry and iPhone did was to be game changers,” said Bateman, whose firm compiles an annual list of the world’s 100 most valuable brands. “As a brand, Palm is a little dusty. Coming from behind, it’s going to have to do an awful lot to make up the difference.”
  • Pre hype has since spread to the television airwaves through the phone’s March 9 appearance on Late Night with Jimmy Fallon, the comedian and talk-show host who marveled at the software that allows users to shuffle through applications like a deck of cards. (boo yah - ok that's a start but I mean serious celebrities)
  • Palm, which enlisted Sprint Nextel Corp. as its exclusive U.S. carrier, said in January that the Pre will come out in the first half of the year.
  • Palm's 180 percent increase for this year is almost eight times Apple’s and compares with a 6.2 percent jump for Research In Motion Ltd., the maker of the BlackBerry phones.
  • Sunnyvale, California-based Palm faces a much more difficult economic environment than Apple did when it introduced the first iPhone. In the two years since, the U.S. economy entered a recession and consumer spending, which accounts for about 70 percent of the economy, fell at a 4.3 percent pace last quarter. “Consumer demand two summers ago or even last summer was much better and was before the market started to tank,” said Matt Thornton, an analyst at Avian Securities LLC in Boston, who rates Palm “neutral” and doesn’t own shares. “So it does make things much tougher for Palm.”
  • Sales growth of smart phones, which have Web and e-mail functions, will slow to 3.4 percent this year from 22 percent in 2008, according to IDC. That compares with the mobile-phone market overall, which will shrink for the first time since 2001, the Framingham, Massachusetts-based researcher said. (you know this is serious when people stop trading in phones for the 'latest and greatest' models every 90-120 days)
  • Palm sales will mainly be based on the Pre, Treo phones and any future WebOS devices, analysts say. The company needs to sell 5.5 million units annually to revive profits and 8 million to justify the current stock price, which will require “success beyond Sprint” in the U.S., said Tavis McCourt, an analyst at Morgan Keegan in Nashville, Tennessee.
  • Palm, which has posted losses for seven straight quarters, needs more partner carriers to translate anticipation for the Pre into the sales volume necessary to make the company profitable, said McCourt, who rates the stock “market perform.”
  • Palm has yet to name any foreign partners for the Pre and won’t say when the exclusive deal with Sprint expires. McCourt predicts Palm will sign Spanish service provider Telefonica SA for distribution in Europe and Latin America in the second half of the year.
No position


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