Palm Shorts Celebrating Chinese New Years in Style Thanks to OTR Global Report

With a new distribution deal with Verizon (VZ) in hand and another with AT&T (T) in the works, Palm is about the last company you’d expect to shut down production of its entire smartphone lineup. Yet, that’s what it did. As OTR Global reported in a breathless alert this morning (see below), Palm manufacturing partners Foxconn and Compal have temporarily shut down production of the Pre, Pre Plus, Pixi and Pixi Plus.

But not for any worrisome reason, as the OTR note seemed to imply.

No, Palm handset production was shut down in observance of Chinese New Year. And, contrary to OTR, which suggested that production might not resume in March, production will indeed resume by March. In fact, sources close to the company say current plans call for it to resume near the end of this month.

Anyway, here’s Palm’s statement on the matter. Presumably, now that the statement has been issued, Palm (PALM) shares will recover some of the losses they suffered earlier today because of OTR’s note. But Palm shorts, I’m sure, had a field day with this one.

“Palm regularly adjusts its product manufacturing levels to manage inventory,” the company said in a statement sent to Digital Daily. “In anticipation of the Verizon Wireless launch and Chinese New Year, we increased production levels prior to February, and anticipate ramping production back up after the Chinese New Year ends.”

Palm Inc. Alert
Palm Orders Production Halt of Pre and Pre+ in February
February 11, 2010
PALM, S, VZ, 2038 HK, 8078 TT
Sources: 3 sources Taiwan handset component supply chain (all repeats)
Key sources in the Taiwan handset supply chain said Palm Inc. has ordered assembler Foxconn International Holdings Co. Ltd. to suspend production of both the Pre and Pre+ in February. “The decision is very sudden, and Foxconn was told to reduce all February Pre forecast to zero on Wednesday and nobody knows whether shipment will resume in March,” said a key source. The source said the CDMA2000 Pre to Sprint and the CDMA2000 Pre+ to Verizon were affected.
Pixi Production Suspended Too?
One source said Palm also told Compal Communications Inc. to suspend shipment of the Pixi and Pixi+ in February, while another source said that production is still going ahead with the Pixi+ to Verizon, but actual delivery in February will amount to less than 5,000 units.
Reporter: Van Tran
Editor: Hartmut Leuschner