Let the mud-wrestling begin.
entered the mire with price-cutting rival
on Monday, tackling its first price reduction. Handspring took $50 off the Visor Deluxe's $249 price tag and at the same time offered a $50 rebate for the new Visor Platinum product and a $30 rebate on the peripheral Springboard modules.
Palm set the stage for the showdown after it hoarded a mountain of components just in time for the current economic slowdown. In its third-quarter earnings call, Palm announced it would slash prices to move those components in the form of low-end m100 devices. During its third-quarter earnings report Handspring management said it would try to stay above the fray, but cautioned that revenue and margins could fall in the fourth quarter based on Palm's low blows and a tough economy.
Curiously, both affected Visor products are relatively mid-range, not bread-and-butter handhelds that would compare with Palm's bargains on the low-end of its line.
analyst Matt Adams thinks Handspring may have low-end price cuts planned. "This is not what I expected. I expected price cuts more on the basic and solo products because Palm cut prices on its m100," he said. "I thought that would be the likely place to reinvigorate the market."
Last week Handspring CEO Donna Dubinsky told a
audience that Handspring would come in at the bottom of its $130 million to $136 million revenue range for fourth-quarter guidance. Monday's price cuts may account for some of the anticipated revenue falloff, as the cuts come one month into the fourth quarter. The mail-in rebates are more likely to hit revenue and margins in the following quarter.
Handspring's stock has lost 30% of its value since Dubinsky outlined her expectation in the quarter. If the company jumps back into the ring to combat Palm with reduced prices on more lines, Adams believes the stock could retest its early April lows "in the $8.50 and $9 range," when Handspring and Palm languished following Palm's forecasting
full Nelson. In recent trading Monday, Handspring was down 79 cents, or 6.1%, to $12.24.
The Street in general holds Dubinsky and her team in high regard, and Adams is positive that "the management is not going to panic," but Palm's willingness to roll in the mud makes it tough for Handspring to keep things clean.