Monday, November 06, 2006

Calls of Note Part 2

- Piper Jaffray has some interesting comments on Palm (NASDAQ:PALM) saying based on monthly handset channel checks, they believe Palm Treo sales were solid at Sprint during October, but Treo sales were weak at Verizon and Cingular.

Despite an increased $100 mail-in rebate reducing Treo prices to $299, checks indicated weak demand for the Treo 700p and 700w at Verizon stores due to price cuts in the competing Motorola Q phone. With a $100 mail-in rebate added for the Motorola Q, the price to consumers fell to $99, which resulted in re-accelerating Q sales and lower Treo sales, according to firm's checks. Further, the BlackBerry 8703e introduction also appeared to negatively impact Treo sales.

At Cingular, checks indicated Treo 650 sales remained weak due to stronger demand for the Nokia E62, HTC 8125 and BlackBerry 8700. However, Cingular store managers indicated several new smartphones will launch by year-end, and they believe this includes the 'blackjack" by Samsung, "pearl" by Blackberry, 8525, and the Treo 680 and 750v. While the firm believes the two Treo launches at Cingular will improve trends for Palm at this channel, they are somewhat surprised by the total number of smartphones Cingular could potentially offer.

Overall, they believe Palm sales trends are tracking in line with PJ November quarter pro forma EPS of $0.22. Maintains $16 tgt and Mkt Perform rating.

Notablecalls: Looks like the competition is still a major drag for PALM. As I'm not aware of any new-new products coming from the co, Christmas sales will likely fall short of analyst expectations. With the shares trading 17-18x consensus EPS that's probably too high, I think the stock will be lower over the next couple of weeks.

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