Palm Stung by Sell Rating

Palm gets slapped with a sell rating on concerns that the new arrivals in the smartphone market will crowd out the Pre.
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NEW YORK (

TheStreet

) --

Palm

(PALM)

was slapped with a sell rating Tuesday on concerns that the new arrivals in the smartphone market will crowd out the Pre.

The

heroic makeover of Palm

is facing a significant challenge as telcos like

Verizon

(VZ) - Get Report

and

AT&T

(T) - Get Report

align behind

Apple

(AAPL) - Get Report

,

Research In Motion

(RIMM)

and phones built on the

Google

(GOOG) - Get Report

Android operating system, shoving Palm into fourth place among suppliers, writes BMO Capital Markets analyst Tim Long in a research note Tuesday.

The downgrade comes a day ahead of Verizon's introduction of the

Motorola

(MOT)

Droid phone

running on Google's Android system. It also follows a report earlier this month by

TheStreet

that Verizon was

snubbing Palm

next year and putting its full support behind Android and BlackBerry phones. Verizon has said it plans to offer the Palm Pre and Pixi phone early next year.

Google also has plans as

reported here

, to bring its own an Android phone to the market as early as this year.

The heavy competition and the fading popularity of the Pre phone along with the potential cannibalization of Pre by the Pixi next month does not bode well for Palm, Long notes.

"We believe that the company will miss its guidance for the second half of fiscal 2010," writes Long.

Palm shares closed Tuesday trading down 6.3% to $13.38.