By Bob Blandeburgo
Associate Editor
Money Morning
Palm Inc. (Nasdaq: PALM) can't seem to catch a break.
Just days after its stock hit a 52-week high and its new Pre smartphone sold out in its Saturday debut, Apple Inc. (Nasdaq: AAPL) stole Palm's thunder by announcing a new iPhone, the iPhone 3G S, and more importantly, cut the price on its existing 8 gigabyte model to $99-half the price of the Pre.
The move was a very shrewd one that will allow Apple and its iPhone to stay ahead of the pack in the smartphone industry. But Palm's attempt to win a share of the market by releasing a smartphone that is compatible with Apple's iTunes computer software shows that it is determined to give Apple a run for its money.
Pre had an impressive launch, but gauging just how impressive will be difficult until Palm actually reveals the numbers. Analysts' estimates range between 50,000 and 200,000 Pres sold this past weekend. Apple's first-generation iPhone sold 146,000 units on its launch day alone back in 2007.
Shortages of Pre may be to blame for a cooling of investor interest Palm reached its 52-week high of $14.14 on Friday: The shares had fallen 10% by Tuesday's close and were down another 5.5% in mid-afternoon trading yesterday (Wednesday). And it isn't likely that a Pre shortage-artificial or not-would produce the feverish demand that's sometimes seen with electronic products … demand that can send the product-maker's stock into a stratospheric climb.
Palm's Pre is billed as an "iPhone killer" by some, but it really isn't and probably never will be unless it can rival Apple's impressive arsenal of iPhone software applications – known as "apps" in the technology lexicon.
Apple's "App Store" – an online store that sells added features for the iPhone like access to Google Earth, the Weather Channel, and social-networking site Facebook – is a big reason for the iPhone's popularity. More than 1 billion apps were downloaded to iPhones since the App Store's launch last July.
To date, there are 50,000 applications available for iPhone. The closest competitor, Google Inc.'s (Nasdaq: GOOG) Android cell phone operating system, has only 5,000 apps available for HTC Corp.'s G1. Pre had only 18 apps at launch.
Apple takes 30% of the revenue generated by the App Store. Apple Chief Executive Officer Steve Jobs says the App Store generates $1 million in revenue daily, which would mean his company makes about $300,000 from the App Store daily.
Lightspeed Venture Partners' Managing Director Jeremy Liew said Apple made $45 million from the App Store in its first nine months.
Apple's exclusivity with AT&T Inc. (NYSE: T) is due to end next year, and iPhones may become an option on the largest U.S. wireless carrier – Verizon Communications Inc.'s (NYSE: VZ) Verizon Wireless unit – as soon as next year, according to a USA Today report. That would expose a whole new customer base to the iPhone and its popular applications. Sources told The Wall Street JournalPre is set to debut with Verizon in January.
While it remains to be seen if iPhone can be toppled, the one safe bet is that the smartphone market will get more crowded. In addition to Apple's iPhone and Palm's Pre, Research in Motion (Nasdaq: RIMM), which makes the Blackberry, are all jockeying for market share.
Blackberry's biggest advantage over the iPhone and the Pre is that it isn't subject to limiting exclusivity agreements: The Blackberry is available to customers of all major U.S. wireless carriers. Currently, anyone who wants an iPhone has to be a part of – or switch to – AT&T's network, and anyone who wants a Pre must be a to be a Sprint Nextel Corp. (NYSE: S) customer.
Analysts are mixed on RIMM's outlook, but the consensus estimate among analysts is that the Waterloo, Ontario (Canada)-based company will earn $3.96 per share for the current fiscal year, and will see its profits advance to $4.70 per share in 2010. That would push the Price/Earnings (P/E) ratio – currently 25 – down to 17.5 on a company whose earnings are projected to grow at an average annual rate of 20% for the next several years.
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News and Related Story Links:
- TheStreet.com:
Today's Lists on Stockpickr - Google Finance:
Palm, Apple and Research in Motion Stock Snapshot - ZDNet:
Analysts Deem Palm Launch a Success; Pre Inventory Replenishment Eyed - The Associated Press:
Palm Pre Goes On Sale With Limited Supplies - Reuters:
Fans Gather for Launch of "iPhone Killer" Palm Pre - The Wall Street Journal:
Ads Tout Pre's Nimble Moves - CNET:
New Apps Announced for Palm Pre - Apple:
Thanks A Billion - The Wall Street Journal:
iPhone Software Sales Take Off: Apple's Jobs - USA Today:
Apple and Verizon Consider iPhone Deal - The Wall Street Journal:
Palm Pre On Verizon in January - Wireless Week:
Analysts Split on RIM's Outlook - Seeking Alpha:
A Closer Look at Those iPhone App Store Revenue Numbers
Did you hear that the Pre Might be going on the Verizon Network?
First, Apple did not steal Palms thunder as they really didnt release anything in the new iPhone that Palm doesnt already have in the Pre and the $99 iphone is a 2 year old model thats being discounted. Although I can see how some would say that Apple cut it to beat the Pre, and in some ways that would be true, however please keep this as real as possible. They are in business, have an outdated product they want to make money on, and they way to sell off their older stuff, and introduce newer stuff is by discounting it. Apple however has always kept their outdated stuff, as continuous models.
Oh yeah, the Pre (as Im sure you know) has a huge potential to introduce a lot more appsl, and better apps, than the iphone.
In two words, Go Palm!
Palm Pre has a long long way to go. Partnering with Sprint is another problem. The company has the worst customer service. The buzz has already come and gone with the Palm Pre. I am not saying it is dead, but it will take awhile to topple the i phone. If that ever happens.
It looks so confusing article. The writer had only one agenda….market iPhone. On one hand he is talking about 18 apps available on Palm and 5,000 on Android and at the other hand, he's comparing this with a 2.5 years old product. Just wait and watch…Palm will have maximum USEFUL applications.
Interesting projections from the Wireless Web. Thanks for the post. Great info. "While it remains to be seen if iPhone can be toppled, the one safe bet is that the smartphone market will get more crowded. " Agreed! It'll be fun to see what's new developments will be brought to market in the next couple of years.
FACT. WebOS is FAR easier to develop for than iPhone objective C.
Given time, there'll be more apps for the Pre. As a web developer 10 to 1 I go with Pre over iPhone. I ALMOST got an iPhone for my next phone, but now it'll be a Pre. Reason being, I speak it's language.
The Palm Pre is geared toward business more than the iPhone. Once some more apps come out (and they will) it'll crush the iPhone. Palm also is working on Flash support — so let's see…. HTML, JavaScript, Flash….. Uh…… Uh….. what does 90% of the stuff we see on a computer these days revolve around ?? What are you looking at right now? That's right, web scripting languages!
So. That said, The Palm Pre is a MUCH more NATIVE companion to the internet than the iPhone.
This doesn't say the Pre isn't any good or isn't an iPhone killer. It just goes to show the massive hold the iPhone has on the market. That could change though…
I for one am going to get Palm Pre and build (quickly) all the apps I need to do my job. Period. I can tie in existing web sites and projects with it in no time at all…. I just can't use it as a selling point unfortunately to clients…because they'd rather have an iPhone app…For now (though in the future it'd be both).
Trackbacks
[…] Palm Inc. (Nasdaq: PALM) stock rallied more than 12% yesterday (Thursday) after news that it appointed former Apple Inc. (Nasdaq: AAPL) executive Jon Rubenstein as its chief executive officer (CEO), closing at $13.43. Rubenstein was senior vice president of Apple’s iPod division when the popular media player launched in 2001, serving until 2006 when he became chairman at Palm. Outgoing CEO Ed Colligan, who has been with Palm since its inception in 1992, will take some time off and then join private equity firm Elevation Partners, which owns a 25% stake in Palm. The CEO swap comes just days after Palm launched its Pre smartphone, gunning for Apple’s popular iPhone. […]
[…] high-tech sector's prospects as part of Money Morning's mid-year forecast series, and also detailed the marketplace battle between the Apple Inc. iPhone and the Palm Inc. Pre in a "Hot Stocks" […]