Palm shares continue slide after weak forecast; UBS, Kaufman cut ratings
By APFriday, February 26, 2010
Palm shares continue slide after weak forecast
NEW YORK — Shares of Palm Inc. continued their slide Friday, hurt by a sales forecast that cast doubt on prospects for its new smart phones in a fiercely competitive market.
The stock was down 19 cents, or 2.9 percent, to $6.34 in afternoon trading. That follows a 19 percent drop on Thursday.
UBS cut the company’s shares to “Sell” from “Neutral” in a client note Friday. UBS analyst Maynard Um wrote that Palm will have to lower the prices of its phones or put more money into marketing them — both unattractive options given that the company has been losing money for years.
Palm has been looking to turn itself around with its new phones, the Pre and the Pixi. But it faces competition from Apple Inc.’s iPhone, the BlackBerry from Research in Motion Ltd. and new devices such Motorola’s Droid. All have the same kind of advanced functions, including e-mail access and Web browsing.
Kaufman Bros. analyst Shaw Wu also lowered Palm’s rating Friday, cutting it to “Hold” from “Buy.”
In a note to investors, Wu said he is concerned the company might not become profitable until a year or a year and half from now. And the launch of its phones on the Verizon Wireless network had less of an impact on sales than he predicted.
Palm, which is based in Sunnyvale, Calif., said Thursday that it expects sales this year to be “well below” its previous forecast of $1.6 billion to $1.8 billion. For the quarter ended in February, it is expecting between $285 million and $310 million, while analysts surveyed by Thomson Reuters were looking for $424.9 million.
