PALM Struggling to Compete

Although Palm, Inc. (PALM - Snapshot Report) has significant traction with its Centro smartphone, the low selling price has resulted in an ongoing decline in revenue and margins. Moreover, the coming 3G iPhone priced at $199 is aimed at the same market as the Centro, and will likely take much of Centro’s share on networks where the two compete.

Palm has new high-end products slated for launch in FY 2009, however at this point we believe it will have a hard time regaining lost share as Research in Motion (RIMM - Analyst Report) has aggressively rolled out new devices. We believe the company cannot exist in its current form as it is too small to effectively compete in the market for smartphones, and will face challenges due to its drain in cash flows. Hence, we reiterate our Sell rating on the shares.

We maintain our six-month price target of $4.00. Although there may be a few positive catalysts surrounding new product releases over the next six months, we feel the long-term prospects are bleak for Palm.

Read the full analyst report on PALM

Read the full analyst report on RIMM