Investors have been selling shares of Palm Inc. at a rapid pace this year, worried that the company won't be able to turn its business around with new smart phones because of fierce competition from Apple and BlackBerry.
The stock has lost nearly 40 percent of its value so far this year. On Thursday it fell 22 cents, or 3.5 percent, to $6.05 in afternoon trading. Shares of rival Research in Motion Ltd., meanwhile, have risen nearly 4 percent year-to-date.
Palm has been looking to revamp its business with its new Pre and Pixi phones. But it faces tough competition from Apple Inc.'s iPhone, RIM's BlackBerry and Motorola Inc.'s Droid. Last month, Palm said it expects sales this year to be "well below" its earlier outlook of $1.6 billion to $1.8 billion. It also gave a revenue forecast for the fiscal third quarter, which ended in February, that was well short of Wall Street estimates.
Avian Securities analyst Matthew Thornton sees the stock falling as far as $4 in the short term, since not even the stock's cheap valuation is enough reason for investors to dive in.
To make a comeback, Palm will need to improve its marketing efforts and launch strong hardware, according to the analyst.
"Everyone has universally accepted that the software is great," said Thornton in an interview. "(But) the hardware just doesn't stand out."
Coupled with lackluster marketing, the company has fallen behind its competitors. Motorola has done a much better job marketing the Droid, for example.
Thornton rates Palm "Neutral" with a target price of $6.50.
"I think they've got one more shot," he said. "Competition is only getting tougher. One more slip-up in the way of ho-hum hardware design and it's going to be lights out."
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