iPhone v. Pre (Revisited)

  • Posted: 25 June 2009 08:46 PM #31

    WillyPitt - 25 June 2009 11:44 PM

    I’d just love to see some of these analyst’s models that are justifying valuations of $15-20 for PALM.  Some quick math…IF they hit 4 million phones, assume $500 a phone = 2,000 million in revenue.  25% gross profits(500mil) subtract out this year’s marketing(175mil), R&D(175 mil), SG&A(55mil) and that leaves them with 95 million in profits before taxes, depreciation, etc.  So under my best case I could see them making somewhere around 50 million.  The book value is -425 million and declining, so how do you value this company at 2-3 billion dollars? There are only so many cell phone users, you cant expect Palm to grow to much more than 4 million units a year even in the future.

    And thereby you prove how - and why - Wall Street constantly undervalues Apple. It has nothing to do with the quality of the company and all to do with how it can be manipulated to earn cash.

    Signature

    .

         
  • Posted: 26 June 2009 01:21 AM #32

    I think the issue for Palm is positioning the company in the best way for acquisition. The Pre will undoubtedly increase revenue (for now) but without a follow-up product to extend the product portfolio reach it will be tough going. The major competitors in the smart phone market are well capitalized. The question is whether or not the Pre has staying power and whether or not the 3GS and the $99 3G iPhone will slow the Pre’s sales momentum.

    The success of the Pre is already baked into the share price and taking nothing away from the Pre’s design and its early success, Palm will need to continue its investment in the OS while attracting developers to its platform. The early sales success of the Pre will in part determine the level of developer support while updates to the OS will be needed in a fierce market fight. R&D is a significant percentage of revenue and that investment will need to be maintained is to improve the company’s market position over time.

    I see an acquisition coming and the share price may soon reflect a bit of an acquisition premium.

         
  • Posted: 26 June 2009 01:30 AM #33

    DawnTreader - 26 June 2009 04:21 AM

    I see an acquisition coming and the share price may soon reflect a bit of an acquisition premium.

    How high of a price tag do you think it could fetch? It would be foolish for anyone to pay a large premium on top of the already inflated price for a company that is continuing to lose money.

    Who are real buyers?
    Dell? They get thrown around but I really see no reason for Dell to purchase them.  It does not fit with their business and they would not create any synergies.

    The only company that I think makes sense would be for Motorola to purchase them.

         
  • Posted: 26 June 2009 01:52 AM #34

    As an acquisition target I’d look at valuation as a multiple of annual revenue. However, I don’t see much value to the product line outside the Pre. As an acquisition target the buyer would be looking for a building market position and the acquisition cost net of assets received compared to the cost of building or creating a market entry.

    The product IMHO would not be a good fit for Dell. Palm’s future is the Pre and the webOS, not Windows Mobile products. Dell will be looking to aggressively purchase revenue streams and achieve cost savings through staff consolidations. A quick question: What’s the value of the CEO to the company? Right now Rubinstein is writing his own ticket and the acquiring firm would need to cater to his personal form of genius in order to keep innovation alive.

    The acquiring firm would have to be no stranger to innovation and one with a history of supporting R&D. I could see HP as a potential suitor and for HP to move into the consumer smart phone market Palm might be a good fit.

         
  • Posted: 03 July 2009 10:54 AM #35

    This came up yesterday but didn’t catch it until this morning:

    And for You, Mr. McNamee? Ah, Yes?The Boiled Crow Sandwich.
    by John Paczkowski  
    Posted on July 2, 2009 at 12:01 PM PT

    ?You know the beautiful thing: June 29, 2009, is the two-year anniversary of the first shipment of the iPhone. Not one of those people will still be using an iPhone a month later.?
    ? Palm investor Roger McNamee

    Palm (PALM) seems to have satiated pent-up early demand for its new Pre smartphone, constrained supplies be damned. In a pair of investor notes issued today, analysts at Pali Research and JP Morgan say that sales of the Pre have tapered off to a point where supply and demand are roughly in parity.

    ?We have concluded our 3rd round of channel checks for the Pre,? writes JP Morgan analyst Paul Coster, who notes that demand for the handset is hovering at about 40,000 per week. ?The gap between supply and demand has closed at Sprint and BestBuy stores, waitlists are eliminated or down, and most stores now have Pre devices in stock.?

    Pali Research analyst Walter Piecyk also surveyed the Pre landscape and reached a similar conclusion, though he sees the slowing of sales as a bit more pronounced. ?We believe that Palm Pre sales have slowed over the past week for Sprint to under 40,000 from 50,000-60,000 last week,? he writes. ??We suspect that if sales continue to moderate, Sprint would increase its marketing budget for the product. The marketing budget behind the product has been somewhat limited to date compared to the marketing push that Apple does.?

    Indeed. And let?s not forget that Apple (AAPL) has a new handset on the market that?s been selling quite well. Makes you wonder if this ebb in demand for the Pre is somehow related.

    Guess it?s looking like Palm investor Roger McNamee?s hyperbolic predictions about iPhone-to-Pre conversion aren?t going to quite pan out.

    Article can be found Here.

    Signature

    .

         
  • Posted: 03 July 2009 01:53 PM #36

    Demand for the Pre will moderate. It’s a mistake to position the Pre against the iPhone. As long as Palm and Sprint battle the champ rather than using the available resources to expand the smart phone market the phone won’t reach its sales potential.

    Here’s why: iPhone users are quite satisfied with their phones. It’s not a fertile market. Positioning the Pre to existing customers and competitor’s customer not currently using a smart phone is a much better bet.

    Palm’s problem is the high cost of produce development including the handset, webOS and building out an app store. The company needs more than one webOS entry in the market and needs to wean the company from its other offerings. That will take time and investment. Battling the iPhone right out of the box is not an effective way to build sales and attract new customers.

         
  • Posted: 03 July 2009 05:25 PM #37

    rattyuk - 03 July 2009 01:54 PM

    This came up yesterday but didn’t catch it until this morning:

    And for You, Mr. McNamee? Ah, Yes?The Boiled Crow Sandwich.
    by John Paczkowski  
    Posted on July 2, 2009 at 12:01 PM PT

    ?You know the beautiful thing: June 29, 2009, is the two-year anniversary of the first shipment of the iPhone. Not one of those people will still be using an iPhone a month later.?
    ? Palm investor Roger McNamee

    Palm (PALM) seems to have satiated pent-up early demand for its new Pre smartphone, constrained supplies be damned. In a pair of investor notes issued today, analysts at Pali Research and JP Morgan say that sales of the Pre have tapered off to a point where supply and demand are roughly in parity.

    ?We have concluded our 3rd round of channel checks for the Pre,? writes JP Morgan analyst Paul Coster, who notes that demand for the handset is hovering at about 40,000 per week. ?The gap between supply and demand has closed at Sprint and BestBuy stores, waitlists are eliminated or down, and most stores now have Pre devices in stock.?

    Pali Research analyst Walter Piecyk also surveyed the Pre landscape and reached a similar conclusion, though he sees the slowing of sales as a bit more pronounced. ?We believe that Palm Pre sales have slowed over the past week for Sprint to under 40,000 from 50,000-60,000 last week,? he writes. ??We suspect that if sales continue to moderate, Sprint would increase its marketing budget for the product. The marketing budget behind the product has been somewhat limited to date compared to the marketing push that Apple does.?

    Indeed. And let?s not forget that Apple (AAPL) has a new handset on the market that?s been selling quite well. Makes you wonder if this ebb in demand for the Pre is somehow related.

    Guess it?s looking like Palm investor Roger McNamee?s hyperbolic predictions about iPhone-to-Pre conversion aren?t going to quite pan out.

    Article can be found Here.

    MacDailyNews Take: 40,000 per week x 52 weeks = 2.08 million units per year. In other, more harrowing, words for Palm: At current rates, and very generously assuming no further falloff in demand, Palm will sell fewer Pre units in its entire first year than the number of iPhone 3GS units that Apple has already sold in under 2 weeks.*

    *And, we’re not even counting iPhone 3G units.

    http://macdailynews.com/index.php/weblog/comments/21673/

         
  • Posted: 03 July 2009 05:36 PM #38

    dmbream - 03 July 2009 08:25 PM

    MacDailyNews Take: 40,000 per week x 52 weeks = 2.08 million units per year. In other, more harrowing, words for Palm: At current rates, and very generously assuming no further falloff in demand, Palm will sell fewer Pre units in its entire first year than the number of iPhone 3GS units that Apple has already sold in under 2 weeks.

    The pace of sales will not be sustained. Further, we don’t know how many of the units were sold to existing Sprint customers. As I’ve said earlier, the R&D commitment to the Pre and the webOS is quite high. The good news is it will cannibalize sales of Windows Mobile devices. But Palm needs a big hit and Sprint needs to do more than slow the rate of migration away from its services.

         
  • Avatar

    Posted: 03 July 2009 11:36 PM #39

    All of the above may be true, but aren’t we in APPL to make $$$ ?

    Six months, relative performance AAPL vs PALM

    Signature

    “Even in the worst of times, someone turns a profit. . ” —#162 Ferengi: Rules of Acquisition

         
  • Posted: 04 July 2009 02:21 AM #40

    TanToday - 04 July 2009 02:36 AM

    All of the above may be true, but aren’t we in APPL to make $$$ ?

    Six months, relative performance AAPL vs PALM

    Impressive rise with the most optimistic Palm sales forecasts baked into the share price. There’s no real eco-system supporting the Pre at this time. Not only does the Pre have to succeed, so must Palm’s next webOS-based product. We’ll see.

    I still see the Pre as a means to bid up the price for acquisition.

         
  • Avatar

    Posted: 04 July 2009 10:31 AM #41

    TanToday - 04 July 2009 02:36 AM

    All of the above may be true, but aren’t we in APPL to make $$$ ?

    Six months, relative performance AAPL vs PALM

    Tan what will the stocks look like in the next 6 months. I find it funny you are comparing pure speculative play to Apple.  My siri stock is up more then Apple and Palm but I wouldn’t put it in the same category as Apple because of downside risk, but it is a nice ride while it lasts.

         
  • Posted: 06 July 2009 01:28 AM #42

    As I have previously posted, someone will buy Palm.  Problem for the acquirer right now is that by waiting to see how the Pre did, they are going to have to pay a higher price or gamble on a correction.  If the overall market takes a hit and short interest in PALM does not rise, it might be a clue that something is cooking.

    I spoke with a Sprint executive last week.  He stated that Pre sales are severely supply constrained.  Employees are not being allowed to purchase units yet.  He also offered the opinion that the Pre is not causing switching from either Verizon or AT&T customers.  Rather the sales are going to existing Sprint customers who are upgrading (from Blackberry???).  One way to read this is that Verizon customers who like the Pre are simply going to wait 6-12 months and buy it after the Verizon model is introduced.  Another way to read it is that the Pre is only appealing to people who, for whatever reason, are reluctant to leave Sprint.  (In any event it belies the arrogant predictions emanating from Palm execs that iPhone users were going to switch.)

    Speculating a bit further…. Apple is not getting hurt directly by the Pre, but will suffer opportunity cost, especially after the Verizon Pre comes out.  Assuming no Verizon iPhone in the next year, it could end up that customers will make the Pre/iPhone decision based upon carrier. 

    Of course, the iPhone is a world-wide (come on China) platform, and the U.S. is but one important market.  Nonetheless, a Verizon version of the iPhone might become important in 2010 or 2011.  Unlikely unless Verizon supports GSM, but it is not a sure thing even then; AT&T may make it worth while for Apple to extend the U.S. exclusivity.

    Sorry if I rambled OT.

         
  • Posted: 06 July 2009 05:30 AM #43

    Although Apple “bought” Next, it was Next that took over Apple. That’s how it would have to be if any Pre magic is to be preserved by a buyer. Is Rubinstein going to find working for Sony, Nokia or Dell acceptable after giving up Apple? I don’t think so - I think he’d quit as soon as he could.

    Rubinstein creating a ten year turnaround as CEO of Motorola or Dell might possibly work, but how could that come about?

    And what is this WebOS everyone talks about? It’s a Linux build with only one application supported - a WebKit based (Safari-like) browser. Anyone with a few billion dollars to spend could have one of their own and keep most of the money. There’s not even any significant head start to be had from Palm since you can quickly roll your own Android derivative without buying anything.

    Several CEO’s may be attracted by the idea of buying Palm, but when they run the numbers against what actually comes in the package, I can’t see anyone going through with it at current prices.

         
  • Posted: 06 July 2009 11:23 AM #44

    sleepytoo - 06 July 2009 08:30 AM

    And what is this WebOS everyone talks about? It’s a Linux build with only one application supported - a WebKit based (Safari-like) browser. Anyone with a few billion dollars to spend could have one of their own and keep most of the money. There’s not even any significant head start to be had from Palm since you can quickly roll your own Android derivative without buying anything.

    Apple already had development tools for OSX and it still took quite a while to build the SDK for the iPhone.  How would that work for palm?  Would they just be supplying a bunch of already available linux tools or is this a significantly more complicated ordeal than Apple had to contend with?

    Signature

    I don’t mind being wrong…,I just hate being wrong so FAST!

         
  • Avatar

    Posted: 08 July 2009 12:44 PM #45

    Some recent sales speculation via Barrons

    JNK Securities, a New York based research boutique, hired wireless consultant iGR to survey Sprint stores each week since the phone launched. In a report to clients yesterday, JNK said the checks found that zero of 50 stores surveyed were sold out of the phone. That compares to 8% of stores sold out last week, 28% the week before that, and 38% in the first week of sale.
    JNK also said that none of the stores who were willing to discuss sales sold more than 30 units in the latest week. In week 3,  the upper ceiling on sales was 75 in some stores. The week before that, 20% of stores reporting selling about 100 units. ?Sales have slowed significantly, which was pointed out by a couple of stores contacted,? the JNK report says. The survey found that 40% of stores had sold less than 10 units in the latest week, while 33% sold 10-20 and 16% sold 20-30.
    One novel pastime for data-deprived Palm Pre watchers is to track the number of downloads of the most popular applications from the Palm App Catalog, which is the company?s answer to the Apple (AAPL) App Store. Apparently, when you access the store, you can see how many times a given application has been downloaded. By checking the totals at regular intervals, and doing some basic math, you can get a sense of the trends. If sales of the phones were steady or rising, you would think downloads would be going in the same direction. But one investor who has been tracking the data finds that daily downloads of two highly popular apps - Accuweather and Pandora - have been trending steadily lower for the last few weeks.
    Research boutique JRPG estimates that Sprint sold 84,000 Pre units over the launch weekend, with the number growing by month end to 200,000-250,000. But the research firm contends that the number of units sold weekly is likely to ?trail off considerably as the newness wears off.? JRPG says industry contacts believe 30% of launch-weekend customers were porting numbers to Sprint, defecting from other carriers. But they say the number of new Sprint customers fell to 20-23% in the following two weeks, and now is down to around 14%. The problem with that trend, JRPG analyst David Eller writes, is that in the absence of an ability to draw new customers to the carrier, the Pre will be considered a good phone, but not one with a significant competitive edge over the iPhone or the BlackBerry Storm.
    JRPG also contends that the company should ?take advantage of its temporary aura,? and raise another $100 million in an equity offering.
    Meanwhle, in another note this week, JRPG analyst Gerard Hallaren contends that Sprint is likely to sell 1 million to 1.2 million Palm Pre units this year. But he writes that JRPG believes that in order to maintain exclusivity for another six months, Sprint would have to sell 1.6 million units by year end. ?Absent a serious price cut, we think that is unlikely,? he writes. Hallaren also points out that sales below 1.6 million would also mean coming in well below Street expectations.