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

To: Mark Fleming who wrote (4013)	3/5/2001 10:52:48 PM
From: FNS	Read Replies (3) \| Respond to of 6784

Mark: <<But, QCOM's future IS certain now, so the potential reward will be less. However, I do believe QCOM's earnings will greatly exceed most's predictions as few really understand what's going on in wireless.>> Dumped my k of QCOM on way down at 72, mostly due to volatility. Looks like Q to explode soon...now, re PALM, do you see same volatility as QCOM! Agree that QCOM more certain now...China still a ? and for PALM also, perhaps dude to Sharp's entry! I'd like to see wireless PALM able to operate worldwide...anyone have idea as to timeframe by which this will happen! fns

To: Mark Fleming who wrote (4013)	3/6/2001 3:50:31 AM
From: lkj	Read Replies (1) \| Respond to of 6784

Hi Mark, I have the exact same approach as you. I rather take a sure 20% than a risky 100%. In the QCOM case, 100% appreciation from here is VERY likely in the next few quarters. But is PALM really riskier than QCOM? We know that the current quarter will be the worst quarter for Palm in term of gross margin. With a whole new line of products in the rest of the year, gross margin will easily move up by at least 5% by the Christmas quarter on the hardware. Let's say the revenue will be $1 billion for that quarter. 5% is $50 million and $33 million after tax, or close to 6 cents a share. This margin growth will limit short term risk, and actually bode well for the stock to appreciate after this quarter's conference call. Licenseing from existing partners such as Handspring, and new partners such as Kyocera will continue to boost the OS royalty. Making it nearly a viable business model. When you consider the royalty that the hardware unit has to pay when Palm Inc. split up, the OS company will surely be a solid company by itself with revenue easily topping $100 million (use $10/license). This bodes well for the mid term (3 quarters and beyond). I am solely investing in Palm because of the software unit, yet PALM is being priced as the whole Palm Inc, which is grossly shadowed by the hardware unit. What is the hardware unit worth by itself? Palm can probably ship 10 million units this year, and 03 might be around 16 to 18 million units. This is one great business, growing far faster than cellular phones, and if you look at the BOM, PDAs have MUCH higher margins than cell phones. This will make Nokia and Motorola very uncomfortable. For a general guideline, let's say that Nokia is going to ship 100 million handsets in 03. (Not sure how good this number is.) And Nokia has a $121 billion market cap. Let's say $100 billion of the $121 billion is for the handset business, then its safe to say that Palm-Hardware is worth 16/100*100=$16 billion market cap. And the fact that Palm-Hardware is growing a lot faster than Nokia-handset, and PDAs have a higher ASP than handsets, Palm-Hardware's market cap should be upward adjusted to $20 billion or higher. This bodes well for 7 quarters and beyond. If you take my opinion that the software unit is worth more than the hardware unit, and that the hardware unit is worth $20 billion based on comparison to Nokia, what should PALM be appropriately priced? We have a $10 billion market cap right now, and that is pathetic. I am not sure when the market will be getting back to senses, but I feel that if Palm executes well, it could easily triple in 12 months, and if the company is to split up in 2 years, we could see PALM go up 6x. The amazing thing is that Palm still wouldn't have to demonstrate that it's the next Microsoft. Am I being overly bullish? Probably, but you can see that there is some senses in my argument. And who is going to tell me that the moon, the sun, and the earth will not line up in a straight line any time in the next 2 years? Best regards to you and everyone else, Khan