Novice Investing - Sweaty Palms Unnerve Investors

Date: Tuesday 13th 2008f May 2008 07:31:45 AM

Sweaty Palms Unnerve Investors - 12/19/2007

By: Novice Investing Staff

Life has never been worse for Palm Inc. (PALM). The inventor of what is now known as PDA (Personal Digital Assistant) has stumbled many times in its existence. In its evoluation, PDA has come to what we know as the smartphone. Competitors include Research in Motion Blackberry and Apple's iPhone. But now, things can't get any better for Palm. In the latest quarterly earning report Palm reported $ 9.6 Million (9 cents per share) of net loss. For ongoing quarter, Palm now forecasts 14 to 16 cents per share of net loss.

Having been acquired by private equity and paying a special dividend of $9 per share, Palm's balance sheet is not in an excellent shape to withstand continued loss. (Ok, small losses are still tolerable). With its $9 of special dividend, we estimate that Palm may have a negative net cash of $ 300 Million or roughly equal to 25 % of its annual revenue.

The bad news is that competitors are aggressive in the field. Apple had recently claimed the number two throne after Blackberry in US sales for the third quarter of 2007. This despites being a late starter in the game. Apple went into the smartphone market by launching iPhone just this past June 2007.

The good news is that tide can turn quickly at Palm. Being in a dynamic technology field, one or two successful product launch will propel Palm back in the game, just like Apple did with its iPod sales five years ago. Looking at the past, Palm earned more than $ 50 Million annually in a number of occasions. Thus, with market capitalization of $ 550 Million, Palm may represent a good value if it can just find its way around. Will Palm find its way around? How about we take a look at its websites and look for any new products around.

For example, visiting Palm's website (www.palm.com), you can find Palm Centro Smartphone which is affordable with a price tag of $ 100 if you subscribe two years with Sprint. Thus far, the Centro is the lightest and smallest smartphone from Palm. Looking at its sleeky design, Palm is targeted for young adults who just entered the workforce. Anyway, that is just the first few things you should look up if you are interested in analyzing Palm as potential turnaround candidate.

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Palm Inc. (PALM) or any other securities.

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