Palm watching: Analysts worried about uptake at Verizon

A pair of analysts ignited a fresh round of hand-wringing over Palm's prospects for a comeback, with the company's performance at Verizon Wireless as the latest source of concern.

"We believe Palm demand has not seen a material uptake following marketing promotions and believe the overall U.S. market weakness may have the biggest impact on Palm given its lower relative quarterly unit shipments," wrote UBS analyst Maynard Um in a research note to clients. That assessment stands in stark contrast to Um's evaluation of Verizon's Android sales, headed by Motorola's Droid. He wrote that UBS believes total first-quarter Android sales at the carrier of 1.65 million units could be "conservative."

The pessimistic sentiment on Palm was echoed by Bank of America/Merrill Lynch analyst Vivek Arya, who downgraded the company's stock and chopped his price target in half to $10. Arya lowered his Palm smartphone shipment targets for the current quarter to 900,000, down from 1.1. million, and lowered his forecast for the following quarter to 1.2 million, down from 1.5 million. "Palm's superior platform features have not translated into sufficient carrier support and consumer demand, and we are concerned the window of opportunity may be closing as Google's Android ecosystem gains ground, RIM revitalizes its portfolio, iPhone increases its presence, and as Microsoft reboots its efforts with Windows Phone 7," Arya wrote in a research note. "With only $130 million of net cash in an opex intensive space, Palm's options may be limited in our view."

Arya's opinion has declined dramatically since November, when he wrote that Palm was "a company with an attractive platform, selling into a high-growth market."

The warnings on Palm appear to have spooked investors. Palm's stock has steadily fallen this year from a high Jan. 15 of $13.56 per share to a low at close yesterday of $9.11.

Palm is banking on wider carrier support to boost its fortunes. Verizon began selling Palm's smartphones in late January, and AT&T Mobility has promised to sell Palm phones sometime later this year.

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

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