Fairness doctrine doesnt usually apply to blog entries. But when it comes to talking about Palm, I guess it is appropriate to offer equal time for opposing views. The other day, I talked about the Barrons article where RBC Capital's Mike Abramsky spoke positively about Palms Q1 earnings. Tim Beyer at Motley Fool (www.fool.com) certainly had an opposing take in his post titled Palm Will Burn Your Portfolio that appeared on Wednesday, July 30.
So why is Mr. Beyer so down on Palm?
To start, as far as Mr. Beyer is concerned, the iPhone, BlackBerry and whatever Nokia has up its sleeve pretty much has Palm surrounded. All thats left is the formality of Palm waving the white flag and relinquishing the remaining smartphone territory theyve claimed to this point.
Not so fast Timmy-boy. Theres more to this story than meets your eye.
His post consists of four points about Palm. The company...
- Point 1: Lost its Mojo
- Point 2: Lost its market share
- Point 3: Lost its talent
- Point 4: Lost its ability to innovate because of its CEO
And because of these things, he concludes Palm is the worse stock ever. Lets walk through his points.
Point 1: Regarding Mojo
Mr. Beyer referred to Palm as an out of work actor. He quoted one of the 100,000 CAPS investors, ZenLunatic99, stating, "I've had three units over the last 5 years and they all operate in a strikingly similar manner. No pizazz.
What I see is that the Centro has provided a viable alternative to pricey smartphones, coming in at $99 or less and running a gianormous family of Palm OS software from developers who have been working with the company for over 10 years.
And as far as Im concerned, this whole mojo (pizzazz) thing may be a tad over-rated. The Centro is now available at three major carriers so it is accessible to the masses with just the right amount of features at a great price point. If VW didnt claim it first, Palm could say it is What the People Want.
Per a story in the SF Chronicle,
"The Centro is inexpensive, it's easy to use and clearly it's appealing to younger users," said Lawrence Harris, an analyst at CL King & Associates in New York.
Point 2: Regarding Market Share
Mr. Beyer has selected numbers to support his argument. But other numbers out there present a different picture. For example, just this week Palm announced that two million Centros have been sold with the latest 1 million phones moving in less than four months. Thats pretty impressive. Sure the $199 iPhone, sold 1 million in the first three days after its July 11 debut. But the iPhone aficionado isnt a likely candidate for The Peoples Palm anyway. Did customers of the screamin BMW M5 have the VW Rabbit or Jetta in their consideration set?
Also, for the record, IDC issued numbers in June that showed Palm in a favorable light. In Q108, Palm had 13.4 percent of the market for advanced phones, up from 7.9 percent in the previous period. Apple's share fell to 19.2 percent from 26.7 percent. Research In Motion Ltd.'s BlackBerry dominated the market with 44.5 percent, up from 35.1 percent.
IDC analyst Ryan Reith was quoted saying, "The Centro's been a success because it's very attractive to someone who doesn't want to pay $300 to $400." He also noted, "This summer, competition in this market will be as intense as it's ever been."
All kinds of stories can be read into the numbers, so it is important to look with a critical eye.
Point 3: Regarding Talent
Mr. Beyer seems to think Palm is bereft of talent, initially making light of the hiring that has taken place since the Podfather, Jon Rubinstein joined.
In March, a Valley Wag story appeared that talked about how Palm poached another Apple executive. Sure it was a public relations person (Lynn Fox, the former head of Mac PR) that came on board, but that doesnt seem to be the type of move a company that is throwing in the towel/folding the tent/waving the white flag would make. Plus, she joins another Apple veteran, Mike Bell who is running product development. These are positive signs.
Further down in the same post, Mr. Beyer appeared to have reversed himself:
To be fair, Palm has added fresh blood in recent years: Executive chairman Jon Rubinstein and senior vice president of product design Mike Bell are both from Apple. Yet the numbers say they'll need at least a Treo-sized home run to turn the company around.
So it isnt that they lack talent. It is just that the talent has a monumental task ahead. Nobody will deny that
especially how the Centros margins wont sustain the company. Team Podfather definitely needs to hit one out of the park.
Sidenote: The arrival of the Treo 800w via Sprint gets raves
By the way, the early word on the new Treo 800w has been quite positive, per a post on Palms blog titled The Treo 800w is the best Treo ever? It shows quotes from MobileBurn, PC Magazine, TheStreet.com, Treonauts, WMExperts, and ZDNet. Sure, the jury is still out. But this is another positive sign for Palm.
Point 4 - Lost its ability to innovate because of its CEO
Mr. Beyer took a shot at Palm CEO Ed Colligan, describing him as a long-termer who appears to be genuinely passionate about the business, but has a poor track record for encouraging innovation.
He must be doing something right to get Jon Rubenstein, the Podfather, to come on board to revitalize Palm's product development process. And he got Elevation Partners to back the company as it works through its turnaround and strives towards getting the new OS ready for prime time.
In an article appearing last December in The Wall Street Journal (Apple's' Podfather' Now Aims to Revive A Wilting Palm), Mr. Colligan stated, "I knew I couldn't turn the company around by myself. I needed a partner on the tech front who could change the dynamics of our development team."
Colligan also acknowledged the perception that our products had gotten a little stale, and thats why he hired Mr. Rubinstein. For those of you who dont know, under Rubinsteins watch (he was head of hardware engineering), Apple produced the iMac and the iBook. Most important of all, he was Apple's first head of its iPod division. Impressive credentials.
So maybe Colligan cant innovate per se. At least he was smart enough to go get himself people who can.
So is Palm (NASDAQ: PALM) the worst stock ever? Im not an expert and certainly dont want to go on record giving investment advice. What I will do is ask you to look at the big picture. In fact, I encourage you to find and channel your inner Buffett (as in Warren). His investing style, like the shopping style of a bargain hunter, reflects a practical, down-to-earth attitude, as noted by an article posted on the Investopedia website. Could Palm be the next DQ or Geico or Fruit of the Loom or Sees Candy or
You get the picture.
For now, Im a happy owner of The Peoples Smartphone a Centro. And as long as there are still accessories and software support for it, I have no qualms about Palm. Okay, maybe theres one thing
Id love to see them do something about margins.