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

To: Win-Lose-Draw who wrote (4025)	3/6/2001 1:16:11 PM
From: David E. Taylor	Respond to of 6784

WLD: As long as Palm can keep introducing and selling new high end models a la V and VII and ramp up the licensing and content/access revenues, they should be able to keep GM's up around 35%. Demand for PDA's is likely to remain strong for a couple of years yet, and IMO it will take the entry of the Japanese in large volume before GM's will compress significantly. Right now we have just Sony, with Fujitsu, NEC, Toshiba, and Sharp planning on entering the PDA market, but Fujitsu is probably going to use the Palm OS, and NEC/Toshiba may go with Palm also. If this plays out in Palm's favor, it's clearly a positive for Palm via increased OS sales, ditto for the cell phone/PDA combo units a la Kyocera. I'm beginning to see that maybe Symbian will just not cut it - one of the criticisms of the Ericsson R380 is that so far developers have shown little interest in developing applications for the EPOC OS platform. The more the Palm OS expands its user base (and the M100/105/IIIxe's help here), the tougher it will be for any PDA or combo manufacturer to use a competing OS. Palm itself is adding over 2 million/Q to its user base, add in its licensees and it's maybe pushing 3 million/Q right now. Add another 10-12 million Palm OS users in the next year to the current 12 million or so and you have a pretty compelling market force for new entries to the PDA/combo market to adopt the Palm OS. IMO, increasing high margin OS revenues will offset device GM compression. On the hardware side, Dell, the market leader in PC's, has run an overall GM around 22% for years, while Nokia, the leader in cellular, runs around 38% - though the Japanese may well bring that down once the Euro GSM royalty monopoly unravels over the next few years. Both of these companies of course are their respective market leaders, and their competition generally run GM's well below the 22% to 38% range, and their overall GM's are boosted by their non-commodity item sales, but it seems to me that Palm's stated long term target of 35% is certainly achievable over the next few years. Execution and efficient supply chain/production management is the key on the hardware side. Expanding the user/licensee base is the key on the OS side. And getting more users onto Palm.net is critical to the content/access revenenues. JMO, and time will tell. David T.