palmOne Two Palms Lighter

A rule of thumb suggests that when top executives jump ship, investors should follow them over the guardrails.

Investors in palmOne (Nasdaq: PLMO  ) are best off sticking to that rule as CEO Tom Bradley dashes from the handheld device maker. Announced last night, Bradley's resignation comes just a week after the departure of palmOne's head of global operations and only months after the chief financial officer left her job.

The resignations are timely. palmOne shares plunged in December after the company warned that delays by wireless carriers in rolling out its new Treo 650 smartphone would put a big dent in quarterly earnings. In Q3, industry analysts Gartner Group (NYSE: IT  ) found that Palm operating system shipments had shrunk by 28% and its market share had dropped from 47% to 30%, falling behind handheld operating system rival Microsoft (Nasdaq: MSFT  ) .

The stock fell another 5% this morning. With Bradley heading out the door, the market appears to have lost its confidence in palmOne.

Of course, there is the always a chance that things can get better. Perhaps a change in leadership is what's needed to rejuvenate the company and its share price. palmOne states: "The company is now positioned for profitable growth and success. We respect Todd's desire to move upon this key milestone and appreciate his willingness to support the company through its transition." And at today's $25 share price, the stock looks tempting. You can buy palmOne for just 14 times 2005 earnings and less than 2005 sales.

But I wouldn't buy it. Resignations usually mean trouble.

For more, see palmOne Down, but Not Out?.

Fool contributor Ben McClure doesn't own shares of any companies mentioned in this article.


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