(Palm story updated for executive departure, analyst comments)
SUNNYVALE, Calif. (
) -- What will be the fate of beleaguered smartphone maker
Last Friday, an analyst said a sale of Palm is imminent, and not only that, but that Palm would command a price much higher than anyone expected.
By Monday morning, other analysts were saying that a deal for Palm looked unlikely.
The fate of Palm seems to change by the day, and it's been that way since the beginning of the month.
In the first week of April, reports surfaced that Palm had hired a series of high-profile tech bankers, including Frank Quattrone and Goldman Sachs, to scout out potential suitors. Not surprisingly, M&A arbitrage traders dialed into Palm shares.
However, by Tuesday of this past week, the M&A battery that had charged Palm shares seemed to be dying. Palm shares had popped from under $4 to over $6 from April 6 to April 12, but Palm shares dropped by almost $1 at the market open on Tuesday, and haven't found a way to speed dial back to above the $6 mark since.
Not that the M&A rumors died down as the trading week ended. In fact, Palm shares received a little trading juice on Friday, after RBC Capital Markets was out with an M&A-themed report on Palm that made bold claims about a potential deal.
Friday was not just a down day for the markets -- led by the news that the Securities and Exchange Commission was suing Wall Street bad bay Goldman Sachs for fraud -- but it was a down day for technology as well. Yet, Palm defied both the general market and tech trends for a 3.5% gain on Friday.
The RBC Capital Markets report likely had something to do with Palm's up day on such a down day for the markets.
Some might say that RBC Capital Markets doesn't know Palm like the back of its hand.
Regardless, what did RBC have to say about Palm?
While Palm shares are currently trading between $5 and $6, RBC Capital Markets said in a research note on Friday that Palm could command as much as $10 to $14 in a deal.
A bold claim, considering Palm's current share price and the fact that Palm's sales strength and market share have significantly eroded. What's more, all the previous rumors about a Palm white knight have centered on a potential Asian technology firm buyer.
The RBC call seemed even bolder on Monday morning, when Palm shares slumped by close to 8% in early trading on a new round of rumors that Palm won't be sold.
The latest Palm rumors stemmed from the news that Michael Abbot, senior v.p. of software and services at Palm had left the company.
Both Morgan Keegan and UBS analysts read Abbot's departure as a sign that an acquisition it not pending for Palm. Morgan Keegan also cut its rating on Palm from hold to sell on Monday morning.
Previous press reports have indicated that Palm's biggest venture capital backer, Elevation Partners, has been insistent on an acquisition price tag of at least $1 billion. The RBC Capital Markets' estimate of $10 to $14 a share, however, would represent close to $1.7 billion, at the low end of RBC's share-price range.
It has been reported that
walked away from a potential deal with Palm, and Asian players including
are being seen as the likely suitors.
RBC Capital Markets, on the other hand, made the claim in its research report on Friday that the best M&A handshake for Palm would be from
RBC made its call based on a strategic inflection point in the smartphone space. The RBC analyst believes that Palm's
software should receive a strategic premium because there is a big land grab going on in the smartphone market.
What's more, there is a fear among technology players that
will become too powerful.
Palm's problems have been building brand and market share, not the underlying operating system for its smartphones. It's the marriage of Palm's strong webOS with a strong market brand that could command the $14 premium per Palm share. The $14 premium would mean an acquisition price tag of more than $2.3 billion for Palm.
Clearly, there has been no shortage of noise on the line as Palm and its bankers seek a rescue. Thus we dialed out to
audience to see if investors had strong opinions on the likelihood of a Palm deal.
We asked readers of
Will a tech sector suitor answer Palm's call of distress at a price to merit all the recent trading in Palm shares?
The results we received from survey takers indicated that readers believe a deal for Palm is likely, but that the price that RBC Capital Markets thinks Palm shares can command is a leap of faith.
Approximately 65% of survey takers think a deal for Palm -- in some shape or form -- will get done: Approximately 37% of survey takers think Palm will be sold, but will command a lower price than expected. Another 28% of survey respondents are convinced that bankers can phone this deal in: Palm will be connected to an acquirer soon, as there is no other choice for the company. Add those together, and there's your 65%.
Still, that also means that a full third of survey takers aren't ready to dial into a Palm deal.
Approximately 21% of votes indicated that Palm's acquisition outlook is no better than its business outlook: uncertain at best.
Another 14% of survey takers have already dropped the Palm M&A talk call. These respondents think that if Palm is to survive, the smartphone company will have to answer its own SOS, as its potential acquirers get hung up on deal details, and ultimately hang up on Palm and its bankers.
And one cautionary note: Earlier this week,
The New York Times
referenced the fact that one of Palm's bankers, Frank Quattrone, has been attempting to sell
Brocade Communications Systems
since October -- so investors should not exactly hit send on a Palm deal.
-- Reported by Eric Rosenbaum in New York.
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