Phone
The Pre wowed visitors at the Consumer Electronics Show in Las Vegas this January with its WebOS operating system and wireless charger, winning the events top honor and pushing the stock up more than 80 percent over two days. Palm may ship 2.6 million in the first year, according to the median estimate of 10 analysts surveyed by Bloomberg.
Apple sold 6.1 million iPhones in the year after the 2007 debut, before the worst economic slump in a quarter-century sapped consumer spending. Palm, whose sales fell 71 percent last quarter, has neither the base of Apple devotees from which to draw nor the BlackBerrys niche in the corporate world, said Andy Bateman, who leads the New York office of Interbrand.
“What the BlackBerry and iPhone did was to be game changers,” said Bateman, whose firm compiles an annual list of the worlds 100 most valuable brands. “As a brand, Palm is a little dusty. Coming from behind, its going to have to do an awful lot to make up the difference.”
The Pre received praise at CES, where event-goers cheered the unveiling and named the device “Best of CES.” Pre hype has since spread to the television airwaves through the phones March 9 appearance on Late Night with Jimmy Fallon, the comedian and talk-show host who marveled at the software that allows users to shuffle through applications like a deck of cards.
Palm, which enlisted Sprint Nextel Corp. as its exclusive U.S. carrier, said in January that the Pre will come out in the first half of the year. Spokeswoman Lynn Fox said its too soon to judge how many Pre phones Palm will sell in the first year.
Stock Rebound
Sprint, based in Overland Park, Kansas, will showcase the device at its “Pre VIP Lounge” at the CTIA Wireless trade show in Las Vegas this week.
Palm, whose stock had plunged 42 percent in the year before the CES presentation, lost 34 cents to $8.46 yesterday on the Nasdaq Stock Market. The 176 percent increase for this year is about eight times Apples and compares with a 6.6 percent jump for Research In Motion Ltd., the maker of the BlackBerry phones.
Sunnyvale, California-based Palm faces a much more difficult economic environment than Apple did when it introduced the first iPhone. In the two years since, the U.S. economy entered a recession and consumer spending, which accounts for about 70 percent of the economy, fell at a 4.3 percent pace last quarter.
“Consumer demand two summers ago or even last summer was much better and was before the market started to tank,” said Matt Thornton, an analyst at Avian Securities LLC in Boston, who rates Palm “neutral” and doesnt own shares. “So it does make things much tougher for Palm.”
Smart-Phone Growth
Apple, which now sells the iPhone in 80 countries, may ship 30 million units in the year beginning July 1, said analyst Gene Munster, an analyst at Piper Jaffray & Co. in Minneapolis. He recommends investors buy Apple stock and predicts the Cupertino, California-based company will introduce a new iPhone this summer.
Apple sold about 13.7 million iPhones over the past four quarters, more than quadruple Palms shipments over a comparable period. RIM shipped about 6.7 million BlackBerrys in its latest quarter alone.
Tom Neumayr, a spokesman for Apple, and Research In Motion representative Tenille Kennedy declined to comment.
Success Beyond Sprint
Palm sales will mainly be based on the Pre, Treo phones and any future WebOS devices, analysts say. The company needs to sell 5.5 million units annually to revive profits and 8 million to justify the current stock price, which will require “success beyond Sprint” in the U.S., said Tavis McCourt, an analyst at Morgan Keegan in Nashville, Tennessee.
Palm, which has posted losses for seven straight quarters, needs more partner carriers to translate anticipation for the Pre into the sales volume necessary to make the company profitable, said McCourt, who rates the stock “market perform.”
Gains Justified?