Analysts divided over Palm's prospects

This weekend, Sprint Nextel is set to debut Palm's second phone based on its webOS platform--the Pixi. But analysts are still divided over Palm's potential going forward.

Northeast Securities analyst Ashok Kumar is pessimistic about Palm's chances. In a research note to clients, he said that sell-through checks indicate "substantial decline" in recent sales of the Pre, Palm's first webOS device. He added that prospects for Palm look bleak. "As a fading brand, carriers are likely to see better returns on their promotional and advertising dollars with other vendors," he said in the note. "WebOS has negligible smartphone OS share, 0.2 percent per Gartner estimates, and is unlikely to attract any meaningful third-party application support. Palm has bet the farm on webOS and there is a real possibility that they may not achieve critical mass."

Others think the situation is far less dire. Bank of America/Merrill Lynch analyst Vivek Arya is bullish about the company's prospects after meeting with Palm's management, including CEO Jon Rubinstein. "Our key takeaway: despite increasing smartphone competition, Palm can maintain differentiation and remains well-positioned to launch its products with multiple new Tier-1 carriers in early 2010 by which time it should have a robust apps catalog," Arya said in a research note. "While we expect the stock to remain volatile, the recent sell-off creates an interesting buying opportunity, in our opinion, for a company with an attractive platform, selling into a high-growth market, and at a compelling valuation."  

The Pre was first launched by Sprint in June, and went on sale in Europe through the carrier O2 just last month. Verizon Wireless is also going to launch the Pre in the beginning of next year.

For more:
- see this GigaOM post
- see this Barron's blog post

Related Articles:
Palm faces challenges as competition heats up
Verizon, Sprint roll out holiday smartphones
Palm smartphone shipments drop by 30%
All eyes on Palm ahead of earnings
Palm debuts Pixi, cuts Pre's price

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