Nice comments about Compaq's iPaq Pocket PC !!!
Palm Tumbles as It Forecasts Loss, Blaming Economy (Update8)
By Greg Chang and Jim Finkle
Santa Clara, California, March 28 (Bloomberg) -- Palm Inc.'s shares fell as much as 49 percent after the biggest handheld- computer maker forecast a loss this quarter and cut its sales outlook as rivals take away customers.
``Palm is losing ground to new rising stars,'' said Jean Fournier, who helps manage $340 million at Finance Rembrandt in Paris. He holds shares of rival Compaq Computer Corp. and none of Palm's. The company is ``a victim of its own success. When a product works well, why change it?''
Compaq is making 100,000 of its iPaq Pocket PCs a month and is backordered, spokesman Arch Currid said. Compaq and Handspring Inc. disputed Palm Chief Executive Carl Yankowski's assertion late yesterday, when the company gave its forecast and fiscal third- quarter results, that lower consumer spending is hurting the entire handheld-computer industry. Handspring didn't give sales figures.
Palm has about 70 percent of its industry's sales. The company's shares fell $7.50 to a $8 in late morning trading after sliding to a record low of $7.94. More than 78 million shares changed hands, the third biggest volume in U.S. markets.
Handspring, maker of Visor organizers, fell $4.72, or 29 percent, to $11.47, and Compaq fell 84 cents to $19.40. Research in Motion Ltd., maker of the Blackberrry two-way pager, fell $4.17, or 17 percent, to $20.51. Extended Systems Inc., which Palm plans to acquire, sank $8.56 to $10.50.
The problem may be that Palm hasn't introduced new products fast enough, letting companies such as Compaq and Handspring gain sales, analysts said. A year ago, a parts shortage kept Palm from making enough devices to meet soaring demand. Now they're piling up in warehouses a few weeks after Palm announced plans to introduce two new high-end models with expanded functions.
The Outsider
Yankowski, a Silicon Valley outsider who Palm recruited away from shoemaker Reebok International Ltd. in December 1999, said he plans to fire as many as 250 workers, or as much as 15 percent of the company's workforce, as a result of the shortfall.
Palm, based in Santa Clara, California, expects a loss of 8 cents a share on sales of $300 million to $315 million in the fiscal fourth quarter ending in May. It was expected to earn 3 cents on sales of $572.6 million, the average estimate of analysts polled by First Call/Thomson Financial.
The stock traded as high as $165 in its first day of trading in March 2000 after the initial public sale of shares in the former 3Com Corp. unit. That day it had a market value of about $53 billion, more than Ford Motor Co.'s $50 billion. Palm's market value has tumbled to about $4.6 billion.
Market Conclusions
In a conference call late yesterday, analysts asked Palm executives if the company was losing ground to competitors.
Yankowski responded by saying that anecdotal evidence from retailers and wholesalers indicates that Palm is suffering from ``what appears to be a sector slowdown.''
Still, the company declined to provide forecasts for the coming fiscal year, saying executives have only recently become aware of the problem.
``We're giving you the best information we can based on what we see today,'' Yankowski said. ``We're dealing with very limited info. This abrupt change is jarring to us.''
Compaq, which makes the iPaq Pocket PC, and Handspring said that demand for their electronic organizers hasn't slackened.
``We see continued sales growth in our business at this time,'' Handspring Chief Executive Donna Dubinsky said in a statement distributed by Business Wire.
Extend Chief Executive Steven Simpson couldn't be reached to comment on whether Palm's sales and profit shortfall could affect plans to sell his company to Palm. Extend spokeswoman Tamra Sloviaczek said the transaction is expected to close in June.
Ratings, Estimates Cut
Several securities firms reduced their ratings on Palm shares and cut their earnings estimates, with some switched to a loss from profit.
Morgan Stanley Dean Witter's Gillian Munson downgraded Palm to ``outperform'' from ``strong buy,'' and cut her fiscal 2001 earnings estimate to 3 cents from 12 cents. She changed her fiscal 2002 estimate to a loss of 9 cents from earnings of 19 cents.
Merrill Lynch & Co.'s Melanie Hollands lowered her long-term rating to ``accumulate'' from ``buy'' and her near-term rating to `neutral'' from ``accumulate.'' Goldman, Sachs & Co.'s Vik Mehta cut his rating to ``market perform'' from ``recommend list.'' Robertson Stephens' Marianne Wolk and Eric Rothdeutsch lowered their rating to long-term ``attractive'' from ``buy.''
CIBC World Markets' Thomas Sepenzis cut his fiscal 2001 earnings estimate to 3 cents from 13 cents, and changed his fiscal 2002 projection to a loss of 9 cents from net income of 23 cents. He reiterated a ``strong buy'' rating.
Palm had a loss in the third quarter ended March 2 of $1.9 million, or break-even on a per-share basis, compared to profit of $11 million, or 2 cents, a year ago. Sales rose a less-than- expected 73 percent to $470.8 million from $272.3 million. The company blamed the loss on costs related to its acquisition of WeSync.com Inc., which lets Palm users share information on the Internet |
