Los Angeles : After nearly two decades of putting cutting-edge personal electronic devices in the hands of consumers, Palm's grip on survival may finally be slipping. The smartphone maker's stock plunged nearly 30 per cent on Friday after several Wall Street analysts offered grim assessments of the company's future.
"They might be going bankrupt," said Vitali Savitski of Canaccord Adams, who urged investors on Friday to sell the stock after making a highly unusual prediction that he expected the value of Palm shares to dwindle to zero. "There's still some hope, but we think it's still a very risky buy."
The analyst's remarks came a day after the company said that it sold far fewer phones than it had hoped in its fiscal third quarter ended February 26, and that the current quarter probably would be worse.
"Our recent underperformance has been very disappointing to me personally and to the entire Palm team," chief executive Jon Rubenstein said during a conference call with analysts on Thursday.
Palm shares fell $1.65 (Dh6.06), or 29.2 per cent, to $4 on Friday. The stock has slipped more than 60 per cent this year.
Initial success
Palm's fate may be tied to the success or failure of its newest line of smartphones, the Pre and Pixi. The Pre debuted last summer to strong reviews and quickly sold out in many retail stores, marking an early victory for both Sunnyvale, California-based Palm and its exclusive wireless carrier, Sprint. But then the phones stopped ringing. In each of the two quarters after the Pre's release, sales dropped nearly 30 per cent, and by the end of February, Palm had sold only 408,000 of its Pre and Pixi smartphones over the previous three months. That was far behind competitors such as Apple, which sold 8.7 million iPhones in its fiscal first quarter.
By January, Palm's share of the smartphone operating system market had dwindled to 5.7 per cent, and it was surpassed for the first time by mobile newcomer Google, which leapfrogged Palm with the help of its much-hyped new touch-screen models, including the Droid and the Nexus One.
Acquisition target
Palm is now far behind market leaders Research in Motion Ltd, whose BlackBerry models own 43 per cent of the market, and Apple, in second place with 25 per cent, according to research firm ComScore.
Analysts said a weakened Palm could eventually become an acquisition target of larger electronics makers looking to add a powerful suite of mobile software to their portfolio.
"If you're LG or a Dell or an HP that wants to be in this business but doesn't have an operating system, Palm might look attractive," said Tavis McCourt, an analyst at Morgan, Keegan & Co. "But whether somebody wants to pay $1 billion for that, it's hard to know."
