It's not getting any prettier for Palm (Nasdaq: PALM).
RadioShack (NYSE: RSH) is reported to be pulling Palm smartphones from its stores and website, as it opts to go instead with Sprint Nextel (NYSE: S) handsets. This comes just as Michael Abbott, the former Microsoft (Nasdaq: MSFT) exec who was brought in to oversee the company's software and services operations, is preparing to leave Palm by week's end.
Losing RadioShack may not seem like a catastrophic event, but I compare it to GameStop's (NYSE: GME) decision to stop selling Microsoft's Zune portable media players two years ago. When a device with such a small installed base loses a distributor, it's like taking a step back with no clear path to taking another step forward.
Microsoft is lucky. It's loaded with greenbacks, so it can keep swinging away with the Zune until it gets things right. Palm isn't as financially fortunate, and that's why buyout rumors have been swirling since the smartphone pioneer's bleak guidance last month.
Losing a key executive won't be a dealbreaker to a potential buyer, since any interested suitor will probably come in with its own regime anyway. Losing RadioShack is a harder pill to swallow, but it was also inevitable. Palm's phones -- despite all of last year's buzz over webOS -- are fading.
I still don't think Palm is headed to zero, as fellow Fool Rich Smith and several analysts think. Plenty of companies could still pick it up at fire-sale prices and rebrand its technology. Unfortunately, fewer retail outlets and a larger number of nervous executives aren't a pretty combination.
If you thought Palm sounded desperate a month ago when it slashed its near-term outlook, it's going to be a beggar now.
I hope Palm makes it. Apple (Nasdaq: AAPL) needs a worthy iPhone challenger to keep it honest and innovative. BlackBerry and Android-flavored smartphones will certainly keep Apple on its toes, but Palm truly had revolutionary potential when its Palm Pre was more hype than reality.
Oh, well. Live and burn.
Do you think Palm will be acquired, turn around organically, or file for bankruptcy protection? Share your thoughts in the comments box below.
