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Paul Sakuma / AP Palm Headquarters |
I, like just about everyone else, was instantly smitten with the Pre from the moment it was unveiled at CES in January. Sleek, slick, a touchscreen display that , dare I say it, offered real competition to Apple and the iPhone.
Ahh, but since then, the devil has been in the details, which quite candidly have been precious few: When will it be released? Palm, and partner Sprint won't say. Price? No sir! Palm partners have hinted at a May release. Then yesterday, word was that Palm would go after Apple during its Worldwide Developers Conference and release then. Not terribly bright in my estimation.
Since the unveiling, the company's shares have been a rocket ship despite several missteps (see Elevation Partners and Palm major investor Roger McNamee and his public pronouncement gaffes that spawned a special SEC filing), and the battle over the touchscreen that makes the Pre, and the iPhone, so special. And let's not forget the upcoming hybrid, touch/type Blackberry from Research in Motion and now the rumored "Pink" from Microsoft.
And yet Palm's shares keep climbing.
Today though, a new voice has entered the fray, courtesy of Collins Stewart analyst Ashok Kumar who says the Palm rally comes against a "skeptical backdrop."
"Since the bottom in December, Palm has increased ten fold on take- out rumors and hype around its Pre smart phone launch with Sprint in 1H09," he writes in a blistering note this morning.
He adds something particularly dire: "Supply chain checks indicate that due to multiple hardware and software issues, PALM has dramatically reduced its production orders for Pre with its ODM partner. The Street currently has modeled over 1 million smart phone unit shipments for PALM in 2H09. We believe this is highly unrealistic."
The reason this is particularly dire: despite protestations from Palm that business practices have changed, that it has somehow found a way to reverse years of execution missteps and bugaboos that nearly drove the company under, this analyst says it's more like business as usual.
He offers more bad news, and not necessarily just for Palm: "Growth rates in the smart phone segment have decelerated sharply – 2007: 53%, 2008: 14%, and 2009E: 5%. Meanwhile the field has become very crowded. Only five vendors – Apple, HTC, Nokia, RIMM, and Samsung – have critical mass. PALM is unlikely to have the scale and scope to be a player long term. This will be a key stumbling block in signing on additional carriers."
And finally: "Sprint is the only major carrier that has signed on to sponsor the Pre platform. Sprint, which has only a third of the subscriber base of either AT&T or Verizon, has been losing customers due to structural problems. In our opinion, it is highly unlikely customers of AT&T or Verizon will switch to Sprint. Across the pond, carriers are taking a wait and see attitude given the high platform cost and lack of conviction on sell through. If Sprint does not match or beat AT&T's subsidized iPhone price of $199, which translates to a subsidy in excess of $200, the Pre is DOA."
As in "dead on arrival," which is a far cry from the clarion calls by some on the Street and those long on Palm that the company has suddenly reversed its blood line of stumbling.
Silicon Valley, indeed Wall Street, is littered with the tomb stones of companies with great ideas who died a miserable death simply because they couldn't get out of their own way. It's stock would suggest otherwise, but absent something more than a couple of handsets shown months ago at a trade show, and now new data suggesting its supply chain and software are suffering, I gotta believe Palm's at risk.
GREAT TECHNOLOGY SLIDESHOWS ON CNBC.com:
- Slideshow: 10 Biggest Tech Blunders in the Last 25 Years
- Slideshow: Evolution of Wireless Communication
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