Palm's not dead, so why write its epitaph?

Wall Street's vultures are circling over Palm, screeching for its death. Tech pundits are joining the death watch, in one of the more morbid displays of graveyard tech journalism ever. As I've asserted repeatedly, in business perception is everything. The Palm death watch creates negative perceptions about the company and its future that will drive away customers and investors. Palm doesn't have to die, but death may be its future as pundits' self-fulfilling prophecies.

Tech blogs simply exploded with Palm is dead predictions over the weekend following a news story that two Wall Street analysts had cut Palm's target price to $0. Zero?  ArsTechnica asserted that "RIP Palm: it's over, and here's why." All Things Digital: "Exercise in Futility? Palm Pre Plus, Pixi Plus Headed to AT&T." OS News: "Is Palm dying?" Monday Note: "Who will buy Palm?" That's a simple sampling.

Palm's most recent misfortunes started with fiscal third quarter 2010 earnings results, announced on February 18. Surely there is concern when the earning's press release quotes the CEO as saying "Our recent underperformance has been very disappointing," and adding that "the potential for Palm remains strong." But the all-a-tither reaction is about inventory and sell-through. Palm shipped 960,000 smartphones during the quarter, but only 408,000 sold through to customers. Well, so much for the benefits of transparency.

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Apple doesn't report sell-through. The company ships XX units but uses "sold" to describe them. There was no whining, for example, when during third calendar quarter 2008, Apple claimed 6.9 iPhones sold, which really meant shipped, and Gartner later calculated 4.7 units sold. That was the iPhone 3GS launch quarter, which ended, therefore, with 2.2 million units unsold. There were no scolding analyst reports or doom-and-gloom blogs or news stories about inventory or the data discrepancy. Positive perception is one reason.

Palm's perception problem is one of survival -- that by pundit predictions death is inevitable. Wall Street punished Palm with a March 19 sell-off that sent shares plunging by nearly 25 percent. Palm closed at $3.98 a share today, following a roller coaster $3.65 to $4.24 ride. Perhaps some investors are unsure about Palm's death forecast -- and they should be. Nothing is certain yet.

There could be more positive perceptions about Palm, if anyone really looked. WebOS is simply one of the best smartphone operating systems ever developed. Palm marketing is aggressive and compelling. Then there are the carrier deals, which keep coming with the bad news. Today, Palm announced that AT&T will distribute Palm Pre and Pixi. That puts three of the four major US carriers in Palm's palm.

But who is going to buy a Palm smartphone with all the negative crap being said about the company's future? Who wants to buy a product today from a company that might not be around tomorrow? Two weeks ago, I met with the accountant who does my taxes. He also manages investments (but not mine, as I have none for conflict-of-interest reasons). This guy recently switched from a BlackBerry to Palm Pre. He loves the Pre but expressed nervousness about owning it because of Palm's stock performance. He's uncertain that Palm has a future, so much that he would consider another smartphone if buying today. Surely, he's not alone in this thinking.

'I'm Not Dead'

Palm's situation reminds of the movie "Monty Python and the Holy Grail," where an old man brought out as dead isn't. The transcript -- from Internet Movie Database:

The Dead Collector: 'Bring out yer dead.'
[a man puts a body on the cart]
Large Man with Dead Body: 'Here's one.'
The Dead Collector: 'That'll be ninepence.'
The Dead Body That Claims It Isn't: 'I'm not dead.'
The Dead Collector: 'What?'
Large Man with Dead Body: 'Nothing. There's your ninepence.'
The Dead Body That Claims It Isn't: 'I'm not dead.'
The Dead Collector: 'Ere, he says he's not dead.'
Large Man with Dead Body: 'Yes he is.'
The Dead Body That Claims It Isn't: 'I'm not.'
The Dead Collector: 'He isn't.'
Large Man with Dead Body: 'Well, he will be soon, he's very ill.'
The Dead Body That Claims It Isn't: 'I'm getting better.'
Large Man with Dead Body: 'No you're not, you'll be stone dead in a moment.'
The Dead Collector: 'Well, I can't take him like that. It's against regulations.'
The Dead Body That Claims It Isn't: 'I don't want to go on the cart.'
Large Man with Dead Body: 'Oh, don't be such a baby.'
The Dead Collector: 'I can't take him.'
The Dead Body That Claims It Isn't: 'I feel fine.'
Large Man with Dead Body: 'Oh, do me a favor.'
The Dead Collector: 'I can't.'
Large Man with Dead Body: 'Well, can you hang around for a couple of minutes He won't be long.'
The Dead Collector: 'I promised I'd be at the Robinsons. They've lost nine today.'
Large Man with Dead Body: 'Well, when's your next round?'
The Dead Collector: 'Thursday.'
The Dead Body That Claims It Isn't: 'I think I'll go for a walk.'
Large Man with Dead Body: 'You're not fooling anyone, you know. Isn't there anything you could do?'
The Dead Body That Claims It Isn't: 'I feel happy. I feel happy.'
[the Dead Collector glances up and down the street furtively, then silences the Body with his a whack of his club]
Large Man with Dead Body: 'Ah, thank you very much.'
The Dead Collector: 'Not at all. See you on Thursday.'
Large Man with Dead Body: 'Right.'

Palm's "not dead," and last week CEO Jon Rubinstein expressed "I feel happy" enthusiasm, despite the disappointing quarter. In a way, the reporting about Palm reflects the sorry state of news reporting that I griped about yesterday. Wall Street is rife with conflict-of-interest. There are plenty of analysts making forecasts for companies in which their clients have invested. Where exactly in the $0 share-price prediction news stories is there disclosure about the analysts' holdings?

Elsewhere today, I caution that news reporters -- be they amateur or professional -- should always ask the question Who benefits?" So I ask right now: Who benefits from Palm death prattling?

Morgan Joseph's Ilya Grozovsky and Canaccord Adams' Peter Misek are the two analysts reportedly lowering Palm to $0. I couldn't easily find disclosure information at the Morgan Joseph Website. But Canaccord Adams had two disclosures pertaining to Palm: "Canaccord Adams or any of its affiliated companies is a market maker or liquidity provider in the securities of the relevant issuer or in any related derivatives," and "Canaccord Adams intends to seek or expects to receive compensation for Corporate Finance/Investment Banking services from the relevant issuer in the next six months."

That kind of information should appear in any blog post or news story making such an apocalyptic claim about any public company. Other than predictions the world will end in 2012, what could be more apocalyptic than a $0 share prediction?

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