Gekko
12-19-2004, 03:05 PM
My Prediction? MORE PAIN.
Troy Wolverton
PalmOne Backlog Has Investors Backing Out
By Troy Wolverton
TheStreet.com Staff Reporter
12/17/2004 12:37 PM EST
URL: http://www.thestreet.com/stocks/troywolverton/10199799.html
Shares of palmOne (PLMO:Nasdaq) plunged Friday after investors were unnerved by the company's earnings report.
The stock was recently down $8.57, or 20.1%, to $33.98.
Although the device maker met the Street's earnings expectations for its second quarter, it issued disappointing guidance for its current quarter. Perhaps more disturbingly, the company reported a sizable backlog in its inventory, particularly in its flagship Treo line of smartphones.
A related concern among analysts was the inventory position held by the company and its partners. At the end of the second quarter, palmOne and its carrier partners were holding nearly 21 weeks worth of Treo smartphones in inventory. Additionally, the company and its distribution partners held another 9.6 weeks worth of inventory in its handheld devices. Both of those figures are well above the company's targets, analysts noted.
Company officials played down the inventory swell. Handheld inventory was at a reasonable level considering that distributors and retailers were bulking up for holiday sales, Morali said. Meanwhile, the smartphone inventory had much to do with the transition from the older Treo 600 to its recently released Treo 650, he said.
"Carrier partners that are currently only selling the 600 have indicated that they are satisfied with their inventory position going into the holidays," said Morali. "Therefore we are comfortable with current channel inventory levels."
Again, the company's comfort didn't necessarily console Wall Street. In order to reduce its inventories to more normal levels, the company will have to double its market share in the smartphone market in its fourth quarter from its third quarter, wrote Needham analyst Charles Wolf in a note issued Friday.
"Given the Treo's $600 retail price point before carrier subsidies, we believe that such an increase in market share is highly unlikely," Wolf noted, maintaining his "hold" rating on palmOne shares. (Needham has provided investment banking business for palmOne in the last year.)
Troy Wolverton
PalmOne Backlog Has Investors Backing Out
By Troy Wolverton
TheStreet.com Staff Reporter
12/17/2004 12:37 PM EST
URL: http://www.thestreet.com/stocks/troywolverton/10199799.html
Shares of palmOne (PLMO:Nasdaq) plunged Friday after investors were unnerved by the company's earnings report.
The stock was recently down $8.57, or 20.1%, to $33.98.
Although the device maker met the Street's earnings expectations for its second quarter, it issued disappointing guidance for its current quarter. Perhaps more disturbingly, the company reported a sizable backlog in its inventory, particularly in its flagship Treo line of smartphones.
A related concern among analysts was the inventory position held by the company and its partners. At the end of the second quarter, palmOne and its carrier partners were holding nearly 21 weeks worth of Treo smartphones in inventory. Additionally, the company and its distribution partners held another 9.6 weeks worth of inventory in its handheld devices. Both of those figures are well above the company's targets, analysts noted.
Company officials played down the inventory swell. Handheld inventory was at a reasonable level considering that distributors and retailers were bulking up for holiday sales, Morali said. Meanwhile, the smartphone inventory had much to do with the transition from the older Treo 600 to its recently released Treo 650, he said.
"Carrier partners that are currently only selling the 600 have indicated that they are satisfied with their inventory position going into the holidays," said Morali. "Therefore we are comfortable with current channel inventory levels."
Again, the company's comfort didn't necessarily console Wall Street. In order to reduce its inventories to more normal levels, the company will have to double its market share in the smartphone market in its fourth quarter from its third quarter, wrote Needham analyst Charles Wolf in a note issued Friday.
"Given the Treo's $600 retail price point before carrier subsidies, we believe that such an increase in market share is highly unlikely," Wolf noted, maintaining his "hold" rating on palmOne shares. (Needham has provided investment banking business for palmOne in the last year.)