Palm's desperate Hail Mary pass
Posted
Dec 15 2008, 01:03 PM
by
Kim Peterson
Rating:
There used to be a time when Palm was a powerful player in the personal device market. Its organizers were attractive and easy to use, and it was a brand that people liked and trusted.
But these days, Palm has been left in the dust, unable to compete with Apple's iPhone and Research in Motion's BlackBerry devices. In just two years, its shares have plummeted more than 80%. Its chunk of the U.S. smartphone market dropped to 8% from 23% during that time.
Palm will attempt a big comeback next year, starting with a new operating system that it has code-named Nova. It will also unveil a number of smartphones that run the software. Palm is promising us a nice third choice between the business-friendly BlackBerry and the fun iPhone, telling BusinessWeek it's aiming for the "fat middle of the market."
It's a long shot. Palm's never had this kind of competition before, and is hitting the reset button to try to start from scratch.
Absent a serious miracle, Palm is doomed to be a niche player, and that seems to be what the company is hoping for. Executives told BusinessWeek they'd be happy with 2% of the global cell phone market.
Palm has pinned its hopes to Jon Rubenstein, a former Apple executive that Palm hired a year ago to lead product development. No doubt, the company is hoping for just a little of the Apple magic.
One major shareholder is optimistic. An analyst at T. Rowe Price, which owns 15% of Palm, says that three or four successful products next year could push the share price to $20 or more. Sales in 2010 would rise 150% to $2.4 billion.
It's not an impossible scenario. But to do it, Palm needs to give us an incredible product line next year, one that can stand up to anything from Apple and Research in Motion (and from Google, the newest player in the business). That's a very tall order.
Palm shares have fallen 9% today. S&P, by the way, recently cut its rating on Palm to "substantial risk" and gave the company a 10% to 30% chance of recovery if it defaults. It also gave Palm a negative outlook.
Related reading:
Palm's survival questioned after disastrous quarter
Palm to close retail stores
Palm Centro: Too much of a good thing
Palm shares sink on loss report
