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Mar. 16, 2009

RBC Capital Markets analyst Mike Abramsky says "we see Palm's Web operating system as a platform spawning a family of mobile devices addressing a broader market opportunity."

Abramsky raised his target price on Palm's stock to $12 from $5.

Palm's Pre phone, the first Web OS device and intended as a competitor to Apple's iPhone and RIM’s BlackBerry, has generated a lot of excitement in the press in the past couple of weeks.

The analyst said the Pre, which should launch in the next 2 to 3 months, is a "compelling alternative" to the iPhone, and he also expects multiple phones operating on the Web OS system.

Abramsky bumped up his estimates on earnings and revenue, saying he expects a fiscal 2009 loss of $1.54 per share on sales of $728 million, compared with a prior estimate of a loss of $1.63 per share on revenue of $740 million.

For fiscal 2010, he now sees a loss of $1.22 per share on revenue of $541 million, compared with his prior estimate of a 62-cent-per-share loss on sales of $1.04 billion.

He also sees Palm as an increasingly attractive acquisition candidate at $15 to $16 per share because of the strength of Web OS and the Pre smartphone.

The next couple of quarters could see poor results due to possible launch delays and litigation.

However, Abramsky said he expects about a 60 percent or more increase in Web OS devices from fiscal-year 2010 to 4.1 million in the 12 months ending May 31, 2011, with smartphone market share doubling to 2.6 percent in current-year 2010.

"We believe Web OS has raised Palm's chances for smartphone leadership," Abramsky said.

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Source: Palm Inc.