Palm Up, but Please Hold Your Applause

"While WebOS and Pre are undeniably compelling, it's too early to call Palm's turnaround," RBC analyst Mike Abramsky writes in a note Friday.

Abramsky's neutral rating on Palm and his wait-and-see approach stems from a bit of skepticism that the company can overcome a few formidable challenges. Having spent the past seven years losing its core customers to RIM and later Apple, Palm has to hope the Pre is compelling enough to reverse the tide. This effort cannot afford any of the ususal setbacks like product delays, supply shortages and telco approval.

(Photo gallery: 2009 Consumer Electronics Show)

And speaking of phone companies, an exclusive sales agreement with Sprint (S), the shrinking No.3 carrier, could be a major hurdle. Says Abramsky: An "exclusive launch on struggling Sprint may constrain sell-through."

Even if Palm's Pre is a hit, its got a lot of ground to make up.

"However well done the Pre may be, it is one model at one operator," says CCS Insight analyst John Jackson. "This is an obvious limitation to sales volume, which Palm sorely needs."

Palm shares, which closed Wednesday at $3.36, ended at $5.96 Friday.

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