Palm’s $99 Centro smartphone is selling well at Sprint Nextel (S) and AT&T (T), Citibank analyst Jim Suva’s sources tell him. That doesn’t mean you should own the stock for a second, he says in a note today.
Why not? Simple:
- Palm has to subsidise the heck out of the Centro to compete with smartphones like Research In Motion’s (RIMM) BlackBerry Pearl and Apple’s (AAPL) iPhone. That slices margins razor-thin.
- Cheap Centros are cannibalising Palm’s sales of its more expensive Treos.
- Cheap Centros could be cannibalising Palm’s sales of non-phone PDAs.
- Any changes that Palm’s new management are making won’t show up until the second half of 2008.
- Apple’s new business-friendly iPhone features will likely hurt Palm more than they will hurt RIM.
- Suva expects Palm to miss consensus of $315.3 million of sales and a 14 cents per share loss when it reports Q3 earnings on Thursday evening.
Suva reiterated his “sell” rating on Palm (PALM) and a $4 price target — 18% below its $4.86 close.