Will You Sell Palm Now?

You know it's bad when revenue declines more than 50% sequentially. That's exactly what Palm (Nasdaq: PALM  ) now projects for its business.

"Given the level of sell-through volumes reported today and the shipments delivered late in Q3, we currently expect fourth quarter revenue to be less than $150 million," Chief Financial Officer Doug Jeffries said in a conference call with analysts yesterday.

Analysts had been projecting $306 million in revenue for the current quarter, a modest drop from the $349.9 million in fiscal Q3 revenue Palm reported last night. They weren't counting on the company's inability to sell hundreds of millions of dollars' worth of inventory. (Total inventory was up more than 55% from the close of the 2009 fiscal year.)

Verizon (NYSE: VZ  ) is partly to blame. Earlier hopes for a lucrative partnership with the carrier appear to have been optimistic. Even Sprint Nextel (NYSE: S  ) , Palm's closest carrier friend, is dating other suppliers, including Google (Nasdaq: GOOG  ) . Sprint says it will soon carry the Nexus One smartphone, reports Dow Jones Newswires.

Wall Street, too, is abandoning Palm. CNN reports that at least two analysts now value Palm at $0. Foolish colleague Rich Smith was arguing this very point a month ago. He looks prescient today.

And let's not forget that early research pegged the Pre smartphone as dead on arrival. Palm has defied those expectations, but not by much. The zombie business that remains has too much inventory, too much competition from Apple (Nasdaq: AAPL  ) , Nokia (NYSE: NOK  ) , and Research In Motion (Nasdaq: RIMM  ) , and too little support from software developers to reanimate its stock.

Better to leave this one for dead. Think I'm wrong? Is there more to the story? Please take a moment to vote in the poll below. You can also share your thoughts in the comments section.

Apple is a Motley Fool Stock Advisor selection. Google is a Motley Fool Rule Breakers recommendation. Nokia and Sprint Nextel are Motley Fool Inside Value picks. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Rule Breakers stock-picking team. He had stock and options positions in Apple and a stock position in Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy has Wall Street in the palm of its hand.


Read/Post Comments (7) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 19, 2010, at 7:54 PM, TomFrog wrote:

    Palm has some decent technology but is undercapitalized. A suitably clearsighted and deep-pocketed investor could take it private. Nokia should think seriously about buying PALM instead of trying to build a smartphone by committee, err, community

    http://conversations.nokia.com/design-by-community/

  • Report this Comment On March 20, 2010, at 8:06 PM, bigkansasfool wrote:

    Palm and others like it are why I don't invest in tech stocks. I have a masters in computer science, so I know tech, but with tech the future moves to fast. Palm is now a dead company were it was the market leader. With Apple, Google, and Microsoft getting into the game, Palm will go the way of Sun Microsystems, Garmin, etc. All market leaders in their day, and all crushed by what couldn't be seen coming 5-10 years ago.

  • Report this Comment On March 20, 2010, at 8:18 PM, Simbalion200 wrote:

    Palm is on the way to becoming a penny stock. Unless you have so much ($) in the stock in unrealized losses that it may be advisable to gamble on a possible takeover in the future in hopes of regaining your loses over the long term, I would sell.

  • Report this Comment On March 20, 2010, at 10:26 PM, burmamonster wrote:

    I don't think palm will be out of the smart phone market. There are still a lot of room for palm, such as Asian market. They will survive.

  • Report this Comment On March 21, 2010, at 12:10 AM, Br0oklyn wrote:

    I Agree with burmamonter i dont think they will fall off the market, i believe they still have a little room to grow.

  • Report this Comment On March 21, 2010, at 7:36 PM, TMFMileHigh wrote:

    @bigkansasfool,

    Thanks for writing.

    >>Palm will go the way of Sun Microsystems, Garmin, etc. All market leaders in their day, and all crushed by what couldn't be seen coming 5-10 years ago.

    If only this were true. Mark Nelson was a large holder of Palm shares and publicly predicted what we're seeing now back in 2006:

    http://www.fool.com/investing/general/2006/06/30/time-to-sel...

    And here's the SEC link to his letter:

    http://sec.gov/Archives/edgar/data/1100389/00011931250601751...

    Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On March 22, 2010, at 8:19 AM, capsoregime wrote:

    It's really a shame, given the Pre is a pretty amazing device, despite its quirks and its horrible marketing. I've used virtually every device out in the market in one form or another, and the Pre is the one I keep for both personal and business.

    WebOS really had something going for it.

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