Palm’s stock drop into single digits due to looming Windows Phone 7 threat

Palm, erstwhile Windows Mobile OEM and now champion of a JavaScript based Mobile OS has been dealt another blow after Bank of America/Merrill Lynch analyst Vivek Arya late Tuesday cut his rating on Palm to Underperform from Buy and halved his target price from $20 to $10.

“Palm’s superior platform features have not translated into sufficient carrier support and consumer demand, and we are concerned the window of opportunity may be closing as Google’s Android ecosystem gains ground, Research In Motion revitalizes its portfolio, iPhone increases its presence, and as Microsoft reboots its efforts with Windows Phone 7,” he writes in a research note. “With only $130 million of net cash in an op(eration) ex(pense) intensive space, Palm’s options may be limited in our view.”

Arya expects Palm’s prospects for sales growth to decrease dramatically, by as much as 20% in Q4, when Windows Phone 7 handsets are expected to arrive. He notes that carrier sales staff prefer to sell devices made by other companies, and does not expect new carrier announcements to make much difference.

Palm’s stock has dropped from a 2 year high less than 6 months ago of $17.46 to less than $9 in after hours trading yesterday.  The company, who is no longer making Windows Mobile handsets, has not seen a profit in more than 8 quarters.

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