Palm Inc. wants out.
The smart phone maker - whose future was looking up just last year - is on the prowl for a potential buyer, according to Bloomberg.
Palm has reportedly hired Goldman Sachs Group and technology industry banker Frank Quattrone to help with the search, and is estimated to be looking at a $1.1-billion (U.S.) purchase price.
The news comes as Palm's share price hovers around a multi-year low. The company has suffered from low sales of its flagship smart phones, as well as a tiny applications environment that makes its WebOS mobile operating system far less appealing for consumers than the iPhone, BlackBerry and Android handsets.
Concerns about Palm's long-term viability are nothing new. Even when the company was riding high on rave reviews of its Pre smart phone, analysts and investors were increasingly questioning how Palm's management planned to bridge the disconnect between critical success and poor sales.
Concern turned to crisis in the past few weeks. Last month, Canaccord cut its price target for Palm to $0.
"We believe Palm's troubles will only accelerate as carriers and suppliers increasingly question the company's solvency and withdraw their support," Canaccord analysts said. "With what appears to be roughly 12 months of cash on hand, an accelerating burn rate, a complete lack of earnings visibility, and substantial debt and preferred equity, we no longer see any value in the company's common equity."
Palm's stock price has given investors whiplash in the past few months. Shares crossed the $15 mark during the summer and fall of 2009, after the company's Pre smart phone hit the market to positive reviews.
However those reviews never translated into strong sales, and the company's share price dropped steadily, sitting at a little more than $5 last month. Shares plummeted again in March, hitting a low of about $4 after the company posted weaker than expected sales numbers and chief executive officer Jon Rubinstein described Palm's performance as "very disappointing."
But the share price surged again in the last few days, fuelled almost entirely by rumours of a potential Palm acquisition.
A number of firms, including Research In Motion and computer-maker Lenovo, are said to be potential fits. However the loudest speculation is about HTC, the Taiwanese smart phone manufacturer that has previously worked with Google on the search giant's Nexus One phone.
However some analysts believe Palm's stock price gains won't last, as the company has yet to find a suitable buyer and, in the meantime, consumers may become reluctant to buy a handset from a company whose future is uncertain at best.
"With a number of other handset vendors to choose from, we believe there is risk that its large customers may choose certainty (support, warranties, customer service, roadmaps, etc.) from other vendors to reduce risk," UBS Investment Research analyst Maynard Um said in a note, adding that the consumer uncertainty over Palm may bode well for competitors such as RIM and Motorola.
