Double Face-Palm: Analysts React to Palm’s Lowered Guidance
No question now: Palm is in for a rough time of it. News that the company’s webOS smartphones are not selling nearly as well as hoped has incited quite a bit of analyst hand-wringing over Palm’s prospects for a comeback. Given the magnitude of the shortfall Palm is expecting, many are questioning the company’s future.
Consider this from J.P. Morgan analyst Rod Hall: “No matter how good the product, we believe that penetrating the channel will continue to be difficult for Palm and will only get tougher as more competitive touch handsets come to market through the year.”
And this from UBS analyst Maynard Um: “Demand weakness is not necessarily a surprise as we noted earlier that a slowing US net add environment would likely have the greatest impact on Palm given its small base. However, the magnitude is slightly surprising to us given management’s prior conviction & visibility to orders. While Palm cites deferral of orders to future periods, WebOS demand will likely be called into question. With the US market being Palm’s best opportunity for more levered growth, we are more concerned with the future growth opportunity.”
Finally, there’s this from Deutsche Bank analyst Jonathan Goldberg, who says it’s going to take a long, long time for Palm’s fundamentals to improve, given its weak traction in the smartphone market: “Our concern now is that bad publicity feeds on itself, with the poor stock price performance denting Palm’s brand and causing potential carrier partners to lose interest,” he wrote in a note to clients.
“There are also potential upside risks as well including the potential for Palm to be acquired, but we think the poor showing to date limits the company’s negotiating leverage,” Goldberg added. Ultimately, we think Palm has the resources to survive and potentially build its position back, but it will take considerable time and they face serious risks in the interim.”
Serious risks, indeed. If Palm (PALM) has fared this poorly in the smartphone market of 2009, how will it fare in the smartphone market of 2010 and the more formidable rivals the year brings with it?
It was hard enough to compete against Apple’s (AAPL) iPhone and RIM’s (RIMM) BlackBerry last year. In 2010, Palm must compete with these popular smartphones and a host of new Android phones, not to mention some impressive Windows Mobile 7 devices heading to market. No easy task, particularly when carrier partners like Verizon (VZ) and Sprint (S) don’t quite seem to be giving Palm devices the marketing push they need to succeed.