Duncan Stewart
Palm Inc.
PALM-Q
TOP PICK
Jul 28, 2008
Top Short Pairs trade. (Match by $ amount, not by amount of shares.) Long RIM (RIMM-Q) and Palm (PALM-Q). Had an OK quarter last month but is looking for a big drop in sales.
They are turning out some neat gadgets and are partnered with RIM (RIM-T) with the Blackberry Connect Solution which will help. They have had a hard time surviving competition from the new cell phones. Not sure of their long-term vision.
Becoming more of a value stock. Being targeted directly by products from Motorola (MOT-N). Anyone using Windows Mobile platform Is going into Palm’s trio space. His strategy is to short this stock and go long Rim (RIM-T).
Top Short (Pair trade going long RIM and short Palm.) Apple (AAPL-Q) lost share in smart phones, RIM picked up about 10 points and Palm picked up about 5 or 6 points but Apple doesn't have its iPhone in stores today. Apple will be coming out with a really hot phone and will probably kill Palm’s resurgence.
Top Short Losing market share. New products coming out and the rumour is that they are terrible. Losing money and has debt. Could be in chapter 11 a year from now.
The launch they did has been quite successful so far. Not a threat to Research in Motion (RIM-T) or Apple (AAPL-Q) but do have a market opportunity. Don't have the backend to drive significant support for a lot of distribution channels. More of a momentum trade than anything.
Main asset that possible acquirers are looking at is their web operating system. They don't stand a chance against the competition so they had better do something quick. There is a lot of debt, preferred shares and will probably want more than what will be offered.
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