were pummeled in recent trading, down $1.75, or 20.81%, shuffling precariously near their 52-week low.
The beating this morning came after Palm reduced its revenue guidance last night after the bell and postponed expectations of profitability in the current quarter. The company said it expects sales to be reduced by more than 20% to $230 million, from prior guidance of between $290 million and $300 million. It also pushed out profitability to the last quarter of the calendar year.
Shares sank immediately in the after-market last night and opened sharply lower after analysts reduced their guidance on the company.
Most analysts maintained their ratings, apparently comfortable with Palm's current price of under $2 a share, with the exception of CIBC World Markets analyst Dale Pfau, the lone sell-side analyst to downgrade Palm's rating to hold from buy. CIBC has no banking relationships with Palm.
Morgan Stanley analyst Arindam Basu was perhaps one of the most bearish on the news, and he questioned the company's forecast for profitability. "We are not optimistic that the company's new guidance of break-even operations this fall is attainable," Basu wrote in a note to investors, maintaining an underweight rating.
He estimated the break-even point to be in Palm's fiscal third quarter 2003, on revenue of $320 million to $330 million, a full quarter further out than Palm's own expectations. Morgan Stanley has managed a public offering for Palm within the past three years.
The company blamed its woes on an overly aggressive spring sales target that was bolstered by strong sales over the holiday season. Palm expected the so-called dads-and-grads season this spring to carry it through the quarter, but the sales boost never materialized, the company said yesterday on a conference call. That, coupled with continued sluggish IT spending that crimped sales on its enterprise market-targeted wireless device, the i705, led the company to reduce its guidance.
Separately, CSFB mobile devices analyst Tim Long downgraded Palm licensee
Research in Motion
. Long's recommendations on Handspring and RIM were reduced to hold from buy.
Handspring shares tumbled in morning trading, down 25 cents, or 12.38%, to $1.77. RIM shares slid 56 cents, or 3.82%, to $14.09. Palm's woes helped negate upbeat news from the Semiconductor Industry Association's report this morning that chip sales gained momentum in April, led by an increase in sales in the wireless sector.