Palm may not survive if estimates correct

Palm was delivered harsh criticism today as analysts downgraded the company following its poor fiscal performance. Canaccord Adams' Peter Misek maintained a "sell" opinion but called for a price target of $0 as he expected the company's situation would only get worse. He predicted a vicious circle that would see carriers and part producers back out with doubts about Palm's ability to stay in business, hurting its ability to sell devices even more.

Canaccord Adams "no longer see[s] any value" in holding Palm stock, Misek wrote.

Simultaneously, Morgan Stanley's Ehud Gelblum cast doubts of his own and estimated that Palm might have as many as 1.15 million phones sitting unsold in the channel. The figure equates to about 197 days of sales at Palm's current rate and, even with 575,000 sales and reduced production to clear inventory, could leave Palm with a quarter's worth of supply by the time it finishes the current quarter in May.

The amount of money Palm consumes could go "well north" of $130 million to $150 million in the next quarter, Gelblum said. He also didn't expect an upward trend until at least the end of the year, especially as new Android and iPhone devices expected for mid-year would likely overshadow most Palm efforts.

The company currently has a lifeline through capital from Elevation Partners, but doubts have been raised as to whether any additional investment will keep Palm active.

These and other analysts attribute most of the poor outlook to excess optimism regarding the Verizon launch as well as the future. The major increase in shipments to 960,000 phones during the winter was based on the assumption that Verizon adoption would be much higher than at Sprint and was thwarted when the Droid became Verizon's actual flagship smartphone. Palm chief Jon Rubinstein also provided little concrete evidence of sales growth at Verizon following stepped up marketing and didn't provide analysts with clear signs of either a change in strategy or signs of future improvement. [via AllThingsD and Barron's]

By Electronista Staff