Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : PALM - The rebirth of Palm Inc. -- Ignore unavailable to you. Want to Upgrade?

To: mr.mark who wrote (713)	5/25/2000 10:18:00 AM
From: Ian	Read Replies (2) \| Respond to of 6784

Competition Is Hurting Palm's Stock By Frances Hong Technology Reporter Since 3Com Corp. {COMS} spun off a small portion of Palm Inc. {PALM} a few months ago at $38 a pop, shares of the maker of those popular handheld organizers have fallen drastically. Blame it on the technology correction or volatile stock market. Better yet, blame it on the competition, some analysts say. Palm Inc. Post-IPO Stock-Performance Chart "There?s always going to be competition in any attractive industry, so the number of competitors coming on board is not surprising," says Crowell Weedon analyst Chris Sessing. According to Palm chief executive officer Carl Yankowski, the handheld device market is a $15 billion to $20 billion industry, which includes access and content. Palm has a commanding 70 percent worldwide market share in the handheld computing market. The company boasts 6 million users and is top dog in Asia, Europe and the United States. With more than 5,000 software programs, it has up to 50 times more programs than its competitors. International Data Corp. estimates that the worldwide market for handheld devices will grow to 18.9 million units in 2003 from just 5.4 million in 1999. At a recent conference, Yankowski said Palm has been increasing its revenue at a compound annual rate of more than 100 percent for the past three years. To boot, the company is profitable. By 2001 and 2002, analysts project earnings of 22 cents and 62 cents, respectively. The company's operating profit growth was 2.4 percent in 1998 and 8.6 percent in 1999. But the daunting question is whether new and increased competition will put any pressure on profits going forward? In addition, component shortages could affect Palm's gross margins for the near term. Should the situation deteriorate, Merrill Lynch analyst William Crawford says he may have to revisit his estimates for 2001. In terms of Palm's competition, analyst Howard Lis of Griffiths McBurney & Partners is placing his bets on Canadian-based Research in Motion Ltd. {RIMM}. Its BlackBerry product is a two-way e-mail pager with a keyboard that allows users to send and receive messages. Its real-time communication is targeted at individuals or professionals who need immediate response and information. Users include Michael Dell and Bill Gates. Now that is some fan support. "RIMM?s offerings are different and far superior to Palm products," Lis says. "RIMM goes after people in the time-sensitive market, and Palm is miles behind in terms of two-way capability. It took a long time for Palm VII to come out, and for the most part, I think it was disappointing." Research in Motion also appeals to Piper Jaffray analyst Samuel May, who has a "strong buy" rating on the stock with a 12-month price target of $100. Research in Motion 52-Week Chart But Sessing defends the Palm device, saying the Blackberry and Motorola Inc. {MOT} devices are just "souped-up" versions of pagers. "They simply don?t have the organizer functions that Palm has," Sessing says. "Eventually, all Palm devices will migrate to the wireless solution." Admittedly, Sessing says the Palm VII isn't the end-all to everything. "You either spend years perfecting it or put something out and improve upon it. [Palm VII] is not a disappointment, but it?s a very strong device." Despite Palm?s features, Sessing still rates Palm "hold" and says investors should wait until after the complete spinoff by 3Com before buying into Palm. Of course, let?s not forget about the almighty Microsoft Corp. {MSFT}, which has spent a few years re-working a scaled-down mini-operating system for mobile computing. Ragen MacKenzie analyst Jonathan Geurkink says the software giant has added several new features and functions that will give users a clear screen resolution. With all that competition, where does Palm?s future lie? Only time will tell if investors will be high-fiving its stock. So far, they have yet to put a hand on it.