Remaining Neutral on Palm as Company Faces Strong Competition

6/6 - "We are maintaining our Neutral rating...Our estimate of $(0.26) for FY09 (May) compares with the analyst consensus of $(0.21). The highest analyst estimate for FY09 is $0.15, which translates into a P/E multiple of 48x, a fairly high multiple for a stock with a debt-to-capital ratio of 50%. Palm has a relatively large short position of 35 million shares, which probably adds to share price volatility."

"We believe sales of the Palm Centro remain solid at Sprint (S: NR-$9.20), but that sales of the older Treo models, including the Treo 700wx at Verizon (VZ: NR-$38.96) and Sprint, and the Treo 680 at AT&T (T: NR-$39.46), continued to slow. In addition, Vodafone (VOD: NR-$31.51) appears to be deemphasizing the Treo 500v."

"Furthermore, the competition is expected to heat up in the next several months with new entries from Research In Motion, Samsung (005930 KS: NR- 709,000 KRW), and Apple. For example, the new Samsung Instinct will be available at Sprint on June 20...It is widely anticipated that a new 3G version of the Apple iPhone will be announced on Monday at the Apple Developers Conference...We expect that Research In Motion could launch as many as four new BlackBerry models by year-end. Two of the models have already been announced."