Palm's Pressure Mounts: Tech Rumor of the Day

SUNNYVALE, Calif. (TheStreet) -- Palm (PALM Quote) has made a miraculous comeback as a smartphone contender, but lately it's been taking it on the chin as Wall Street sees reasons for concern.

The early success of the Pre phone and its WebOS software have gotten Palm back in the game against the likes of Apple (AAPL Quote), Research In Motion (RIMM Quote), Nokia (NOK Quote) and Google's (GOOG Quote) Android phones.

But staying in the game is Palm's new challenge.

Here are three of the biggest concerns looming over Palm:

• Financing: The company's technology might be stable, but its books need help. Chances are Palm needs another dilutive stock sale to raise cash.
• Competition: The Pre's debut was quickly upstaged by Apple's 3G S iPhone and RIM's BlackBerry Tour.
• Demand: After a strong start, the Palm Pre has been languishing on the shelves at Sprint (S Quote).

Palm told analysts on an earnings call last month that it had "sufficient capital" to fund operations and growth. But the speculation around the company's need for more cash continues to grow.

Palm has $255 million in cash and $394 million in debt. The company, while it did trim its losses, still burned through $72.4 million in cash in the most recent quarter. At that rate, Palm has less than a year's supply of money.

Kaufman Brothers analyst Shaw Wu says he is a fan of the Palm Pre/WebOS technology, but he initiated coverage on Palm last month with a hold rating, citing the company's heavy flow of red ink.

Wu says the biggest risk to Palm's continued success -- and more specifically its stock price -- is the company's finances.

To that end, Wu says he "would not be surprised if there were a financing event coming in the near future. It makes a lot of sense," says Wu.