Palm (NSDQ: PALM) provided a stark view of its financial and market position yesterday after releasing its third-quarter results. With inventories mounting, cash reserves dwindling and its market competitiveness to be determined, investors today are being quick to ditch the stock. In afternoon trading, Palm’s stock was down about one dollar, or 18 percent, to trade at $4.60 a share.
To be sure, there were critics that were even more harsh and believe the stock could go lower. Canaccord Adams technology analyst Peter Misek cut his price target from $4 to $0, and maintained his “sell” rating. In a note to clients, he wrote: “We believe Palm’s troubles will only accelerate as carriers and suppliers increasingly question the company’s solvency and withdraw their support. With what appears to be roughly 12 months of cash on hand, an accelerating burn rate, a complete lack of earnings visibility, and substantial debt and preferred equity, we no longer see any value in the company’s common equity.”
Four analysts tracked by Thomson One data now rank the stock at “sell” or “underperform”, and nine others rate the stock at “hold,” reports Reuters. Kaufman Bros’ Shaw Wu was one of the analysts who cut his rating on the shares to “sell” from “hold.” He wrote: “While we believe Palm has some value with its webOS…we are unsure of the company’s prospects as an ongoing concern.”
As we wrote yesterday, the problem is two-fold. First, its Palm Pre and Pixi launch with Verizon Wireless did not go well. Now Palm is left scrambling to unload tons of unsold handsets. With inventory stacking up, revenues in the fourth quarter will be tough, forcing the cash-strapped company to burn through its cash reserves. While Palm will have to cut expenses to stay alive, it doesn’t come at a good time when other competitors, who have much deeper pockets, enter the market or gain momentum.
At this rate, Palm could make an attractive buy-out candidate — something that has already been speculated about extensively. But Palm’s CEO Jon Rubinstein, declined to comment on the likelihood. “There