Palm/RIM shares fall
Shares of smart phone makers Palm Inc. and Research In Motion Ltd. sank yesterday as Palm slashed guidance for the fiscal second quarter and an analyst said RIM was no longer undervalued.
Nasdaq-listed shares of Palm plunged $1.18 (U.S.), or 7.7 per cent, to end at $14.19 on more than four times the daily average trading volume, approaching the low end of its 52-week range of $13.23 to $24.91. For the second consecutive quarter, Palm pre-announced a shortfall in revenue. In September, shares sank on news that the Sunnyvale, Calif.-based company would miss its fiscal first-quarter sales outlook by about $30 million. On Monday, the smart phone maker said it would miss revenue targets by more than $40 million, and earnings targets by at least 4 cents per share for the current quarter, due to a delay in Cingular Wireless LLC's certification of its Treo 750 for sales in the United States. Several analysts followed yesterday with cuts to earnings estimates for 2007 and 2008.
"The shortfall highlights Palm's inability to deliver on conservative milestones," wrote Bear Stearns analyst Andrew Neff in a note to investors. Neff maintained his "underperform" rating, and slashed estimates for the second quarter and full 2007 fiscal year, as well as for 2008. The analyst wrote that while Palm has continued to make progress in offering new models, including the lower-priced Treo 680, competition is intensifying with other device makers that are offering sleeker designs with more features at lower prices.
BMO Capital Markets analyst John Bucher wrote in a note to investors that RIM’s stock valuation was no longer compelling. In Toronto, the company's shares fell $1.46 (Canadian), or nearly 1 per cent, to close at $151.85. Butcher wrote: "We no longer find the current valuation compelling enough to formally recommend RIM shares."