Analysts: Sales of Palm Pre have slowed, could drag down company
Wall Street is starting to turn on Palm, concerned that the Pre smartphone isn't selling as well as previously expected.
In a note to investors, Morgan Joseph analysts Ilya Grozovsky and James Moore downgraded their rating on Palm from Hold to Sell because they believe sales of the latest smartphone has slowed significantly and will miss projections for the quarter ending August 31. From the note:
Our checks have shown that Pre sales have slowed to approximately 100,000 units in July, from approximately 200,000 in June, and we believe August shipments are tracking lower than July's. This would bring Pre shipments below our previous 400,000 estimate for the F1Q10 quarter. As such, as have lowered our Pre shipment estimates to 350,000 for the August quarter. We believe that our 400,000 units estimate for Pre was a low estimate relative to Street expectations and, as a result, believe that should the company even achieve these numbers, it would be viewed as a disappointment by investors.
In addition, they expect shipments of non-Pre phones to be lower than expected, cannibalized by the Pre. And they also lowered their sales and non-GAAP EPS estimates for the year, as well as the estimates for next year.
In addition, they also believe price cuts are inevitable as the company tries to spur sales for the holiday season. They believe it could hurt Palm's margins, which would in turn push profitability beyond management's guidance, something that the analysts are "increasingly skeptical about."
All of this and Motorola hasn't even introduced the lineup of new Android-based phones expected out later this year.
The smartphone game has really heated up and it appears that Palm is finding out the hard way that a comeback might be harder than expected.
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