Tuesday, November 07, 2006

Calls of Note Part 4

- Citigroup comment on Palm (NASDAQ:PALM) after news that NTP were suing the co for patent infringement. NTP was the company that successfully sued and settled with RIMM recently. While litigation is clearly never desired, the timing is bad for Palm given the ramping competitive pressure as vendors target the pro-sumer smartphone space.

At the same time, the company needs its cash balances in order to fund product development in order to address the new competition. At best, the litigation would be a mgmt distraction. At worst, it could influence carrier decisions around how aggressively to stock and market Palm's products.

Some had held out hope that Palm would be acquired. Citigroup thinks that it is unlikely that this would occur while the litigation is ongoing. The arrival of a deep-pocketed suitor would only increase the demands from NTP.

Even with the decline in the stock, they do not see a favorable risk-reward. Maintains Hold and $15 tgt.

Notablecalls: While I have been expecting the stock to go down, I can take no credit for what happened yesterday. Things continue to worsen for PALM.

1 comment:

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