Smartphone pioneer Palm
What Fools say:
Here's how Palm's CAPS rating stacks up against some of its peers and competitors:
Market Cap (millions) |
Trailing P/E Ratio |
CAPS Rating (out of 5) |
|
---|---|---|---|
Nokia |
$119,150 |
10.8 |
**** |
Apple |
$116,780 |
29.2 |
**** |
Research In Motion |
$58,690 |
56.0 |
** |
Motorola |
$21,800 |
N/A |
** |
Palm |
$529 |
31.1 |
* |
This is the smallest and the least-loved company in the handset business. The CAPS bulls generally love Palm's products, and several of them think it's simply time for this stock to rise again. The bears point to increased competition from the likes of Apple, Samsung, and Taiwanese phone maker HTC. Even after a 46% price drop in the past year, several players still think that the stock is too expensive.
What management does:
Palm may have lost its mojo, but the company is not about to die entirely. There are still healthy free cash flows under the surface, and the selling margins have remained stable even as the bottom line faltered.
8/2006 |
11/2006 |
2/2007 |
5/2007 |
8/2007 |
11/2007 |
|
---|---|---|---|---|---|---|
Gross |
34.4% |
35.7% |
36.6% |
36.9% |
36.4% |
35.1% |
Operating |
8.5% |
7.5% |
6.6% |
4.7% |
3.1% |
(0.1%) |
Net |
21% |
5.6% |
4.4% |
3.6% |
2.5% |
1.1% |
FCF/Revenue |
5.7% |
5.4% |
4.8% |
9.2% |
9% |
7% |
One Fool says:
Expect the trailing cash flow margins to drop precipitously after this report, though. Palm had a negative free cash flow of $20.8 million last quarter, and is up against a particularly tough year-ago comparison this time: Free cash flow stood at $78 million four quarters ago.
To stem the red tide, Palm released the funky little Centro handset. The feature-packed but low-cost phone could make Palm's sales respectable once again, though you have to wonder what it'll do to the margins. The good old Treo commands a higher price, and the company has to live with the good and the bad of its strategy shift.
The key question this time, then, is whether the gross profit shrinks or grows compared to last quarter's paltry $103.8 million. Will Palm make up for lost margins through higher volume? Stay tuned.
Wave goodbye in style: