Palm New-ness: A Target Price of Zero
We’ve learned and struggled for a few years here figuring out how to make a decent phone. PC guys are not going to just figure this out. They’re not going to just walk in.”
– In 2006, Palm CEO Ed Colligan utters the words he’d be choking down two years later.
The invitation-only event Palm plans to hold during the 2009 Consumer Electronics Show in early January promises “all that Palm New-ness you’ve been waiting for”–“new-ness” presumably referring to the company’s new Nova operating system and the first line of products to run on it. And after five straight quarterly losses and a year in which it lost two-thirds of its market value, Palm (PALM) best deliver on that promise. Because Wall Street is fast losing its patience with the much diminished handset maker, which, according to Gartner (IT), holds a paltry 2.1 percent of the smartphone market. Indeed, Canaccord Adams analyst Peter Misek essentially threw in the towel on the company Wednesday slapping Palm with a Sell rating at a target price of zero.
“Due to increased competition in the industry, Palm has lost its place as a leading smartphone manufacturer and has gradually become less relevant as more competitors have introduced more innovative smartphone devices,” Misek explained. “The company is financially distressed and lacks any viable future catalysts which could help restore profitability…. We believe that Palm has become largely irrelevant in the smartphone space due to a series of strategic errors and poor execution. With very little balance sheet flexibility to mount a comeback, we believe that Palm shares remain a very risky bet, even at current valuation levels.”
Clearly, Misek doesn’t put much faith in the Palm New-ness that will be on display at CES next month. But there are others who do. Said Mike Bell, a 16-year Apple (AAPL) veteran who joined Palm last year: “I’m fundamentally convinced we’re onto something huge. Some of the stuff we’re working on here is mind-blowing–better than anything I’ve seen before.”
Hard to believe, given what we’ve seen from Palm these past few years. But perhaps Bell’s right. We’ll find out next month.