Palm shares jump on smartphone growth hopes

posted: 35 DAYS 16 HOURS AGO

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SAN FRANCISCO -Shares of Palm Inc. jumped Tuesday after an analyst initiated coverage of the company and predicted that wider distribution of its smartphones will help inflate its subscriber base.

In a note to clients, Morgan Stanley's Ehud Gelblum said the coming expiration of Palm's exclusive deal with Sprint Nextel Corp. will encourage more carriers to support Palm's phones and more developers to build applications for them, thus helping the company "bootstrap itself to relevance."

Palm's latest phones, the Pre and the Pixi, are still carried exclusively by Sprint Nextel, but Palm has said the exclusivity period may end soon after the year is over. Verizon has said it will start selling the Pre when Sprint's rights expire.

Gelblum said that Palm's operating software is "uniquely differentiated such that if it were not for its lack of distribution, inadequate advertising, and resulting limited developer community, Palm would be shipping far higher unit volumes than it does today."

However, Palm still faces a battle against entrenched smartphone competitors like Research in Motion Ltd. which makes the BlackBerry, Apple Inc. and its iPhone and new phones based on Google Inc.'s Android operating system.

Palm shares rose 46 cents, or 4.5 percent, to $10.78 in midday trading. The stock has ranged from $3.14 to $18.09 over the past year.

2010-01-05 13:06:09