Palm's future just got brighter
Posted
Feb 21 2008, 03:30 PM
by
Kim Peterson
This could be a turnaround year for struggling Palm, and all because of three letters: GSM.
The beleaguered smartphone maker already got a boost in the arm four months ago when its new Centro smartphone became an overnight success. But the $100 Centro was exclusively made for Sprint, and that meant it could only be used in the U.S. on Sprint's CDMA network.
That exclusive contract has ended, allowing Palm to take the Centro to other carriers. AT&T jumped at the chance, and this week, both companies announced a new Centro that runs on AT&T's Edge network, which uses GSM technology. That's significant because GSM is the global standard for wireless phones -- 86% of the world's wireless subscribers use it, according to AT&T. The new Centro can place calls in nearly 200 countries.
Stocks didn't respond to the news Tuesday; Palm shares have hovered around the $6.50 mark all week and closed today at $6.35. AT&T shares dropped on Tuesday -- but that was due to a new price war among carriers -- and closed today at $34.47.
Since the AT&T deal isn't exclusive, Palm can start shopping the Centro to international cell phone carriers. And since the new Centro is already wired for the GSM network, there's no stopping Palm from a huge global expansion.
This couldn't come at a better time for Palm. Only 27% of the company's sales came from outside the U.S. in the quarter ended last November. That's down from 34% in the year-ago period. The number of devices shipped internationally fell by 22%.
Analysts say that in a slowing U.S. economy, cellphone makers should diversify their exposure. In other words, Palm shouldn't be so heavily dependent on the U.S. for its sales.
The Centro is still priced at $100, but it requires the wretched two-year commitment that cell phone carriers love. It offers e-mail and Web access, and has a color screen and a full keyboard. Palm isn't saying what kind of deals it's working on with international carriers, but you can bet that Palm execs are racking up some serious frequent flier miles getting some agreements in place. And that's the best thing that can happen right now to Palm, whose stock price has plummeted 60% in the past year.
