Palm Death Watch Begins

August 10 2002:

There just doesn't seem to be any good news for Palm these days.

Last month Palm announced that it would ask investors to approve a reverse stock split, and plans to exchange from 10 to 20 shares for one.

As the name implies, it works like a stock split, but in reverse. Instead of receiving more shares in the company, an investor receives fewer, and in Palm's case that would be a tenth or a twentieth as many. A stake of 2,000 shares in a $1 stock suddenly becomes 200 shares of a $10 stock

It's almost always a mark of desperation. The companies doing reverse splits are hoping to avoid delisting by the Nasdaq (30 days of trading below $1 will qualify you for this back hole).

On Monday Palm's stock dipped to just below the magic $1.00 mark, briefly recovered for a few hours Tuesday, but on Wednesday the stock began to plummet precipitously as investors bailed out in increasing large numbers in an attempt to avoid the black hole of delisted Palm, and by Friday's close it ended the trading day at $0.66.

The sell-off was stimulated by the announcement from Standard & Poor's who said it would drop the company from the S&P 500 index next week.

Palm now has the dubious distinction of being an official Penny Stock, and the future doesn't look good for this cash-strapped company.

On Wednesday August 7th Gartner Dataquest said: "Year over year, the worldwide PDA market during the second quarter of 2002 declined in units by 3.5 per cent. The worldwide PDA market is in a slump and Gartner believes the poor economic conditions contributing to the decline will likely continue through the end of 2002."

Gartner went on to say "Palm may get a lift from its OS 5-based PDAs. However, there will not be any new Palm OS 5 applications available until 2003, so the new hardware will merely run existing software faster"

But this may be a case of too little too late for Palm's hardware division which has been notoriously slow at introducing innovative products.

With the upcoming spin off of the Palm OS division and the very real possibility of a delisting by Nasdaq, Palm's hardware division could simply cease to exist.

This would open up the playing field for Microsoft, who's massive cash reserves will allow it to weather the next several months of soft PDA sales.

What will the mobile informatics landscape look like 6 months from now?

From where we stand today it looks as if the PocketPC will ultimately be the dominant player --- not because it has a superior OS, but because it has the resources to "weather the storm."

Even as we write this we're reminded of the immortal words of Yogi Berra who said it best when he said: "It's hard to make predictions, especially about the future."

Will Palm survive this latest blow?

Will Microsoft "win" by default?

Discuss this article here

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