Add to CartWe’ve followed Palm Inc. (NASDAQ: PALM - $5.96) over the course of 2008 as a special situation within
our mobile Internet coverage area. End markets and the stock market have been volatile for Palm recently
and as we begin 2009 the company and the stock are entering a critical phase. Last week at CES, the big
consumer electronics show in the U.S., Palm announced their new mobile OS as well as their first major
new device, the Palm Pre.
Palm shares have had a wild ride in the last month. On December 5th the consensus view that the company
“would probably go out of business” drove the stock below $2 in active trading. Less than one month later
after a new investment from long-term backer Elevation Partners and the reaction that “Palm is back!”
coming from CES yesterday, the shares are now in the $5-6 range. Our generally positive view remains
unchanged with a share price objective of $11-12 if the company executes well through this transition
period.
The rest of this report lays out the core elements of our stock view over the short and longer term. We
would strongly encourage our clients to consider Palm but be patient at the same time. Some details of the
new OS and product features are not out yet (including price) and there are still one or two very tough
quarters to get through in an economy that won’t provide any tailwinds for Palm. Last but not least, this is
not a market that stands still. The competitors are big, entrenched and combative.