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    Tech Trader Daily - Barron’s Online : Palm: Report Sees Pre Defects Hitting Earnings

    July 20, 2009, 1:17 pm
    Palm: Report Sees Pre Defects Hitting Earnings
    Posted by Tiernan Ray

    Despite being enamored with Palm’s (PALM) Pre smartphone, analyst Kevin Dede with boutique investment banker and brokerage Jesup & Lamont this morning initiated coverage of Palm shares with a “Sell” rating. Dede thinks the shares are worth $12.50.

    Dede thinks Palm’s August-ending Q1 will reflect a high cost for returned units of the Pre owing to a manufacturing defects. Dede bases his analysis on a survey of Pre buyers at an enthusiast Web site, precentral.com. According to that survey, he concludes, 40% of initial Pre sales are returned. In addition, ” Impromptu questioning of managers of local retailers (Sprint (S), Best Buy (BBY) and Radio Shack (RSH)) indicated that about one in three devices is being returned.”

    Dede cautions that “we have neither sufficient confidence nor statistical relevance to bend this data into an official report,” but his point is that the stock trades at 48 times next calendar years’ consensus earnings estimate of 32 cents per share, which he feel does not adequately discount the risk of a high cost for returned Pres.

    Mind you, Dede is modeling a 30-cent loss for the August Q1, higher than the Street consensus of 26 cents, but he has a 45-cent loss for the fiscal year ending next May, which is lower than the average 58-cent loss. In other words, Dede expects Palm to fix some engineering problems that are leading to a high level of returns, he thinks Palm will suffer in the near term.

    Palm shares today are off a penny at $15.35.
    A related Commentary including commentary from our very own Dieter:

    http://news.zdnet.com/2100-9595_22-322834.html
    By David Meyer ZDNet.co.uk
    Posted on ZDNet News: Jul 21, 2009 7:25:30 AM
    An analyst has recommended investors sell their Palm shares, after he read a poll on a Palm fan website that suggested very high return rates for the smartphones.

    The poll, which took place on the PreCentral.net website, saw 40 percent of respondents claiming they had returned their Pres due to manufacturing defects. Based on that poll as a major source of his information — another was direct questioning of retailers — Jesup & Lamont analyst Kevin Dede recommended: "Sell."

    "Golly, our own forums being used to advise investors, we're honored," blogged PreCentral.net writer Dieter Bohn on Monday.

    "Our forums - God love 'em - are likely to have a higher-than-average rate of people experiencing issues with the Pre. One of a forum's main functions is solving problems, so people without problems may not head there. Our PreCentral.net forum members understand that context and take the poll within that context. Your average investor reading a release from an analyst firm may not."

    ZDNet UK has asked Palm for its own Pre return figures, and for clarification on the widespread complaints over the handset's build quality. No reply had been received at the time of writing.
    Last edited by Clack; 07/22/2009 at 12:29 AM.
    "We must not contradict, but instruct him that contradicts us; for a madman is not cured by another running mad also." - Dr. An Wang
  2. #2  
    Closed. Already posted and being discussed.
    analyst: Palm Pre Return Rate as High as 40%

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