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Palm Girds for a Smartphone Comeback

by: SA Editors June 11, 2008 | about stocks: AAPL / PALM / RIMM    
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Palm Inc. (PALM), lead by iPod creator Jon Rubinstein, has secured a top team to develop a smartphone to compete with titans Apple (AAPL) and Research In Motion (RIMM), explains Ville Heiskanen in a Bloomberg.com commentary:

 Now Rubinstein, 51, and a hand-picked team at Palm Inc. are preparing to unveil a Web-surfing e-mail phone to challenge the speedier iPhone Apple introduced yesterday and new versions of Research In Motion Ltd.'s BlackBerry. T. Rowe Price Associates Inc. has almost $140 million riding on the Palm executive chairman's ability to once again produce returns.

Between the booming smartphone market and Rubinstein's track record, Heiskanen finds some seeing huge upside potential for Palm stock - even if the new device enjoys only "modest success":

 With even modest success, Palm stock might more than triple over the next 12 months, according to T. Rowe analyst David Eiswert, who advised the Baltimore-based investment firm to buy 20 million shares, a stake exceeding 10 percent.

...

Products that Rubinstein designed are responsible for half the 60-fold increase in Apple's shares since 1997, said James Faucette, senior research analyst at Pacific Crest Securities in Portland, Oregon. While Palm has revealed no details, the product set to ship next year has a good chance of succeeding based on the winning track records of the people developing it, Faucette said.

Could Palm experience an Apple-style turnaround? Possibly, as Heiskanen points out that another key member of the team is Apple's former CFO Fred Anderson who was instrumental in the company's makeover:

 Among the key players is Fred Anderson, Apple's former chief financial officer. Anderson is a managing partner at buyout firm Elevation Partners LP, which invested $325 million last year to become Palm's largest shareholder, and the person instrumental in bringing in Rubinstein. At Apple, Anderson cut research spending by half even as Rubinstein churned out products like the iPod and iMac computer following the return of founder Steve Jobs.

Palm certainly has a challenge ahead of it. However, just introducing a new smartphone with innovative features and new software systems puts Palm in a better place:

 Even with no success, a new software system places a bottom under the stock partly because it makes the company an acquisition target for larger handset manufacturers seeking to develop computer-like features such as e-mail, Web and video, Eiswert said. ``Our thesis is not only about one new device,'' he said.

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This article has 7 comments:

  •  
    Jun 11 05:25 PM
    NO OS X

    NO groupies

    NO iTunes Store

    NO physical Stores

    NO FUTURE

    It AIN'T THE GIZMO that sells Apple, it is the EXPERIENCE and the SYSTEM and the CODDLE THE CUSTOMER environment.

    Heck, ALL along, the GIzmo's of the other guys were every bit as good, often better.

    It is the SYNGERY, of the panache, cool factor, and sheer blinding speed of innovation, packaged up like a little Lamborghi that you actually can afford.

    Palm is playing catchup going 75MPH now, but the train it is chasing just accelerated from 125MPH to 150MPH with the 3G phone now being released in SEVENTY countries, and 20,000 APPS in the pipeline including TOM TOM and the others to make that thing into a FULL PLATFORM of media, phone, music, games, enterprise, PDA, and bottle opener.
    Reply
  •  
    Jun 11 05:44 PM
    I've got Apple stock, which has been doing very nicely for me. And I use both an iPod and an iBook, in addition to my XP systems. So I'm not a Mac Hater. However, my phone is a small portable LG and my day-to-day life is run from a Palm T|X. I don't know what would be involved in getting eight years's worth of Palm history transferred seamlessly into an iPhone, and I'd rather not find out if I don't have to! If Palm comes out with something that can just keep me moving without an ugly transition - like they did when I went from my Palm IIIxe to this unit - I won't be selling my soul to AT&T, which is something I'd rather avoid anyway. I'll probably get a Touch or a Nano anyway when my Mini finally starts to die, whatever planner I end up with. I'm sure lots of people will buy iPhones, and I'm holding on to my Apple stock, but Palm looks like a nice bargain-bin stock right now, when everyone's written them off. I'm not expecting them to ever beat Apple at it's game - but that's not necessary for the company and the stock to do very, very well.
    Reply
  •  
    Jun 11 06:12 PM
    >>>I don't know what would be involved in getting eight years's worth of Palm history transferred seamlessly into an iPhone, and I'd rather not find out if I don't have to!<<<

    I guess I was wrong then...

    One vote for DINOSAURS, time to buy now!

    Yes, I did forget that some people are "Legacy Lovers" and are still using DOS.

    { sorry, couldn't resist the cheap shot...me bad. }

    I have a wonderful DELL Axim, complete with a few cases, and all the accessories in GREAT shape if anyone wants a deal. Email me.
    Reply
  •  
    Jun 11 06:50 PM
    I like Palm products, and I like Apple products. I don't have a smart phone and don't need one so far. But I do have Palm TX and it's my third Palm (had a Visor first, then T3, which is now my wife's ebook reader). Palm always had great products. And never managed to make money of them, not enough to please investors anyway.
    Disclosure: long Apple, don't have and not going to have any positions in Palm.
    Reply
  •  
    Jun 12 10:59 AM
    TanToday has it right. Apple is doubling it's physical retail space because it's NOT a one-trick-pony. They make $ on everything and they have a mountain of cash to keep leading with innovation. I know so many people who, after just being in an Apple store for the first time, went back and bought...after being blown away by such wonderful service and helpful attitudes by the entire staff, as well as beautiful products. I'm long on APPL and being in an Apple Store just makes my heart sing!
    Reply
  •  
    Jun 12 11:18 AM
    I live my life through a used Palm T3 that I bought off ebay and pimped to its maximum. I too would love for my first smart phone to be one that that is directly compatible. That said, there are too many questions here that Palm isn't answering.

    If they are about to come out with a new phone now, it's going to be a Windows Mobile device. Has anyone else noticed that NO company has ever made a consistent profit off a Windows Mobile device? Such a device would be immediately judged against the Samsung Instinct that just came out; that is against a new device of a new entrant to the market. The iPhone market would barely twitch. Palm, the supposed market veteran, would have to chop its prices below Samsung to stay in the game, and it cannot afford another second tier $99 giveaway eating at its own declining Treo market.

    And the new Linux-based platform they are supposed to be creating? Where/What/When is it? Palm is playing that card so close to its chest, that we don't even have a firm date! We're given no details about it which tells me there are no details to give.

    Sadly, I believe Palm's window of opportunity has passed. Even a home run at this point would do no good when they have lost the ball park.
    Reply
  •  
    Jun 13 02:57 AM
    Palm is passé. They lost me when they bought Handspring and immediately dropped Apple development, and they have gone downhill ever since. They also use Windows Mobile OS now (oy!) and have no redeeming features that I am aware of. They will be lucky to remain in business within a few years, let alone stage a come-back that could match, let alone beat, iPhone. They have as much chance of doing that as Zune did of killing iPod. (You DO remember Zune... ?)

    (Writer has Apple stocks and is long on Apple - for a good reason - they are the superior OS and product!)
    Reply
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