J.P. Morgan Cuts Palm Rating

Analyst Paul Coster says the maker of handheld devices has been hit by delayed shipments of its M500 series

J.P. Morgan downgraded Palm Inc. (PALM )to market perform from long-term buy.

Analyst Paul Coster says Palm's decision to end its pact to acquire Extended Systems is a blow to Palm's stated strategy for selling into enterprise. The preannouncement shortfall is a result of the delayed shipment of Palm's M500 series and a production ramp up impeded by engineering problems leading to inventory stalling in the channel -- particularly in international markets. Coster is confident Palm will get a credit line from banks to navigate through any cash problems.

He dropped his $0.03 fiscal 2001 (May) EPS estimate to $0.10 loss, and cut the $0.10 fiscal 2002 EPS to a $0.07 loss. He also cut the 12-month target to $6.

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