Palm: On a Road to Recovery or a Highway to Hell?
by John Paczkowski
Posted on November 2, 2009 at 8:15 AM PT
With Palm’s shares up more than 900 percent since January, they were destined to suffer a correction someday. And now it seems that day has finally come.
Shares in the handset maker fell some 23 percent last week amid concerns about increased competition from Google’s (GOOG) Android operating system, which is being rolled out on a number of devices at a variety of carriers, including Palm partner Sprint (S).
This morning, analysts at Citigroup (C) cut their recommendations to sell from hold on Palm (PALM) while simultaneously raising their rating on Motorola (MOT) because of its “compelling” new Android handset, Droid.
“Motorola is launching of one of the most compelling offerings at [a] time when many investors have given up on the company’s handsets,” Citigroup analyst Jim Suva wrote in a research note.
“The revolution of product and application service offerings,” Suva added, “is going to start to crack open the enterprise door and could pose a risk for BlackBerry. Major shifts in promotion support creating a promotion commotion in the months ahead favor Motorola and post a challenge for RIMM and PALM.”
Over at CL King, analyst Lawrence Harris is similarly dubious of Palm’s prospects in the months ahead. Noting that Sprint executive David Owens said last week that the carrier plans to peddle a number of new Android devices from HTC next year, Harris sees unfavorable implications for Palm.
“Historically, Sprint has been Palm’s largest customer. Indeed, in the August quarter Sprint accounted for 85 percent of Palm’s revenues,” Harris wrote in a note to investors. “In FY09 (May) Sprint represented 43 percent of total Palm sales. Sprint has a U.S. exclusive on both the Pre and the Pixi through calendar year end. The Pixi will be launched at Sprint on November 15 for $99.99. The Pixi is fairly similar to the $149.99 Pre. Verizon has stated that it will begin offering the Pre in early CY10.”
Expounding on his analysis, Harris notes that “According to a report on Mobile Today, a U.K.-based publication, initial sales of the Pre through Telefonica’s O2 unit in the U.K. have been slow. If this report is correct, than the bulk of Palm’s sales over the next few months will probably continue to be generated through Sprint.”
That Sprint will soon add some slick new Android handsets to its lineup is worrisome, then, indeed. For Palm, it seems, driving conditions on the road to recovery are looking increasingly hazardous.
Comments
why would anyone buy a palm pre when an iphone is the same price and 100x better?
Posted by Sam Harrison at November 2nd, 2009 at 12:16 pmI agree that there is a correction ahead – for the analysts and not Palm.
My response to the analysts is – “Think man, think”.
We can give Motorola kudos for their first Android cell phone device. Reading the reviews on Android, it is furiously a work in progress, but still does not match the elegance of Palm’s WebOS intuitive user interface. And nearly every Android maker is skinning the Android user interface with their own branded approach; it reminds me of the Linux world.
Motorola will face steep competition from other Android makers, HTC, Sony Ericsson, and others. Still, Motorola’s market opportunity will be going up against BlackBerry and Windows Mobile 6.5. Windows Mobile sales have been dropping precipitously over the past two years. In the case of BlackBerry, it appears (no hard data) that the Palm Pre has taken quite a bit of sales from them at Sprint. Putting the Palm Pre at Sprint was akin to having a person going into the midst of a battle and waving a white flag. For Palm to have sold the estimated 600,000 Palm Pre phones at Sprint during its first quarter after release was quite impressive. It shows that Palm had a formidable armor on in the midst of the battle; and that is, their WebOS “smart phone” operating system.
As for the analysts, they should be called to task. Was it not recently they were predicting that Palm’s previous quarter sales would be 300,000 to 400,000 phones, and it turned out to be over 50% above their estimate? Now it seems that they are trying to pry open a window of opportunity to beat down Palm’s stocks, with more of their variant views. The job of the analyst is to analyze, not speculate! At this time, we cannot trust the analysts’ intimations about the performance of the Palm Pre in Europe. They have just been so off the mark so often that their credibility is in question. Unless these analysts are hoping to buy the stock at a low price, then that is called manipulation.
Verizon has stated they will be receiving the Palm Pre after the end of the year (December 2009). And Palm is releasing the new Palm Pixi phone in two weeks time at Sprint, for the busy holiday shopping season; at a price ($100) point significantly lower than the initial release price ($300) of the Palm Pre. At this point in time, no one knows how well Motorola will do in the market with their new Android phone. But in Palm’s case, because of Palm’s exclusivity agreement with Sprint, it is clear that Verizon has been subdued in how much they can say about their marketing plans for the Palm Pre. If anything, once the Palm Pre is released on Verizon’s network, the Palm Pre phone will be the best phone at Verizon for competing against the iPhone at AT&T.
So for the analysts, I would say this is one alternative way to think about Palm, by presenting a little more thought behind your views. As I said, “think man, think!”
Posted by Andrew Augustine at November 2nd, 2009 at 2:37 pmThe problem isn’t the analysts, it’s the Pre itself:
- no native apps
- tops out at 8GB storage
- slow operation
- lousy software keyboard plus lousy hardware keyboard
- thick
- very low battery life
- proprietary US-only networking
- no media sync
- too expensive
Palm is simply not competing in today’s market.
Posted by Fred Hamranhansenhansen at November 2nd, 2009 at 3:08 pmThe Palm Pre is the best smart phone on the market.
- Has hundreds of native applications using Palm’s SDK
- It’s 8GB of storage is sufficient for most users
- The Palm pre is faster than the iPhone 3GS (Tomshardware)
- Overall performance: Palm Pre (13.8s) vs iPhone 3GS (16.4s)
- Hardware keyboard provides nice tactile feedback
- Slim, nice curve design, fits well in one’s hands
- Battery life same as iPhone and other smart phones
- Battery is removable and upgradeable to larger capacity
- WebOS is the best smart phone operating system
- New lower price at Best Buy and Amazon for $99
- Pre estimated to have sold over 600,000 first quarter
- Just released in Canada, Germany, England, etc.
- Can play Internet music while running multiple apps.
- The Palm Pre is the best selling smart phone at Sprint
- The Palm Pre is the #1 selling smart phone at Best Buy
- The Palm Pre coming to Verizon should expand sales
- Palm Pre has great potential, it’s only just begun!
The analysts are reporting vaporware… they are providing opinions without having hardcore data to base those opinions on. In analysis, one should present the case for one’s conclusions. Should an analyst say that a product is not selling well, or should they provide actual numbers? These analysts have been burned so many times, that even they “themselves” no longer have confidence in their analysis. How can you say a company will sell 300,000 phones (through your analysis), only to find out that they ended up selling 600,000! This is total rubbish – they should pack their bags and go back to school! So now, they (the analysts) are learning that it is better to just say – “won’t do well” than for them to stick their heads out and give “real numbers”. They should take heed to John Paczkowski when he said recently “shut up fool”.
Posted by Andrew Augustine at November 2nd, 2009 at 6:37 pmI use both the iPhone and Palm Pre, and what Pre has going for it is the Sprint network. In head-to-head testing, 40 calls of 5 minutes or longer in 3 cities, the iPhone dropped 12 calls (30%) while the Pre dropped 1. The iPhone is a great product, but as a phone on the AT&T network it’s atrocious.
Posted by Phil Baker at November 2nd, 2009 at 11:14 pm