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Palm Slipping Out of Hand (Oct. 1-14)
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 Palm’s
once dominant status in the handheld market has taken a further
beating with its recently announced $259 million quarterly loss
and corresponding 20% decline in sales. The former Wall Street
darling that once had a market cap greater than Ford Motor Company
now has been reduced to a penny stock, bumped from the S&P
500 list, and plagued with nearly $500 million in losses over
the last six quarters. The company is desperately hoping a reverse
stock split will reassure investors of the value of Palm equity
– sounds kind of like Liz Taylor trying to bring back the
golden years by applying a little makeup.
Palm is now betting on a two-tiered brand strategy, with its
entry-level Zire brand and an enterprise Tungsten line to help
it break even this quarter. A risky bet indeed – the company
needs to convince consumers of the relevance of Zire and simultaneously
overcome the doubts that its Tungsten products can't hack it
in the enterprise market. Palm’s history of excess inventory
problems and product delays, along with serious competition
from both ends of the market, spells trouble.
Palm is quickly losing its market dominance to Microsoft-powered
devices, especially in the enterprise. "[Palm] needs to
demonstrate that it’s got the real-time ability to multitask
and until it’s proven, I think it’s going to be a
stretch for the enterprise," said Paul Coster, an analyst
with J.P. Morgan. HP and others such as Blackberry-maker RIM
have gained significant strongholds in IT departments of large
corporations, and Sony and others are nipping at the heels of
Palm’s consumer business. "While Palm once held promise
of becoming the Microsoft of handheld computing, it may have
to settle for becoming the Apple Computer Corp., as Microsoft
replicates its dominance in the PC world," said Charles
Golvin, an analyst with Forrester Research.
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