Discounting is not unusual, particularly as more and more competition is heating up in the space. But the Palm Pre was discounted very fast out of the chute, and then the geared down Palm Pixi, with the worst name by the way, seemingly came on to the market too soon.
There is no way that this sort of discounting cannot rub off on Palm. Even though the discounts are usually at the retail level and subsidized by two-year contracts, the merchants usually turn on the suppliers for cuts. That translates to the notion that Palm will have compressed margins and now it will likely have to make even more unit sales to hit its revenue targets in a highly competitive market.
Palm shares are down just over 3% at $11.26 on only about 93,000 shares as of 9:15 AM EST. As a reminder, the most recent short interest data showed a short interest of 45 million shares in Palm.
JON C. OGG
NOVEMBER 20, 2009
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