Home » Investing, Technology

The Story of Palm

1 March 2010 No Comment

Palm, Inc (PALM) is an interesting story.  The stock has taken a beating in recent days due to an acknowledgement that they simply aren’t selling as many of their phones as analysts had hoped.  I believe that PALM is not a good investment by any means, for a few raesons that I’m going to outline here.

The Strategy

PALM’s stock was trading terribly for a long time.  Then, when they finally announced details of the upcoming Pre phone, it seemed like the stock had a resurgence and moved significantly higher (the stock went from around $1.50 a share to over $16.00 a share in a matter of months!).

Now that they are announcing that sales of the Pre are not as great as hoped, obviously, the stock is lower.  The stock is now as of this writing, trading at just around $7.00 per share.

It seems like the Pre phones are the last ditch effort for this company to return to sustained profitability.  One of the major hurdles to reaching this goal is the competition.

The Competition

Palm is going up against some pretty fierce competition.  The two major players are Research In Motion (RIMM) and Apple, Inc. (AAPL).  To simplify the landscape, let’s say that RIMM’s BlackBerry products dominate the corporate market and Apple’s iPhone line dominate the “cool” or consumer market.  I believe the Pre was positioned to be more of a consumer device like the iPhone rather than the corporate space, so let’s focus more on Apple at this point.

At this point, I’d like to say that I think the Palm Pre is a great product.  The problem is so is the iPhone.  Add to the equation the Apple marketing machine.  Then add to the equation the ecosystem of Apple products that people own and that integrate seamlessly with the iPhone.  Then add to the equation the iTunes and App Store that allow allow the simplest and most robust media distribution to the iPhone.  The result is not a good head to head matchup for the Palm Pre.

Conclusion

Comparing Palm as a company to Apple is not even close.  Apple has multiple, fantastic product lines that are thriving and feeding eachother (halo effect), where Palm has a single (for the most part) product that is going against enormous challenging competition.

As an investor, I’d stay away from Palm.  You can probably trade the stock, but if you’re looking for a portfolio holding, Apple (AAPL) or RIMM are your better bets as they are much better positioned for long term success.

Disclosure: I own no shares in any companies mentioned at time of writing, but that may change at any time.

No Comment »

  • nifumich said:

    I completely agree. The Palm products definitely sell when they come out, but nowhere near as good as the RIMM/Blackberry devices or an Iphone from Apple. It is really a battle in the smartphone market between Apple and RIMM, and the stock prices for these already reflect how good they have done.

    As you said, Palm may be good to buy if they are coming out with a new product and then sell after it goes up a little bit, but they will not sustain their stock price growth and it will always be a low stock.