updated 04:15 pm EST, Wed November 5, 2008
Palm May be Low on Cash
Smartphone producer Palm is likely burning quickly through its cash reserves without the sales figures expected to come along with its upcoming Nova platform, a note from Morgan Keegan analyst Tavis McCourt says. Although the Treo creator had $248 million to draw from at the end of its August quarter, a new filing discovered by McCourt on Monday has revealed that Palm has registered for permission to either take on debt or to issue shares and other securities in order to raise funds.
Making such a move is an indication to McCourt that Palm has or will have "little room" to spend more money without having to generate money through an outside source. The company is estimated to potentially drop from its August reserve levels to as little as $75 million next year, which would stand as a $173 million drop.
Such a plunge in capital wouldn't necessarily be fatal to Palm, whose investment parent Elevation Partners could supply additional funds, but could drastically reduce the confidence of investors who would worry about Palm's continued ability to run without outside help.
In the past year, the California-based designer has increasingly relied on price over features to drive its sales but has posted continuing losses as large jumps in sheer units from the Palm Centro have been more than offset by its sub-$100 price, while more expensive rival devices like the iPhone 3G have also managed to outsell Palm's entire lineup despite a $100 or larger price difference.
The firm has hinged most of its hopes on Nova, as the Linux-based platform should bring Palm devices into the modern era while still supporting legacy Palm OS app.