S PALM @ 17.40

005-palm-pre_mediumI have alluded to it in previous posts, but now I think I should make it official.  I rate PALM a sell.  Palm have put all their eggs in one basket with the Pre.  They have killed their previous operating system in favor of WebOS, discontinued the Treos and Centros, and currently have no other products on sale. In short, the Pre had better work or Palm is in a lot of trouble.

So is it? Well, Palm is reporting that sales are brisk, saying that they have sold about 823,000 units, with a sell-through of 810,000.  But, according to a new report by Town Hall research analyst David Eller, they haven’t actually sold that much.  Palm reports sales when Sprint sells to customers or ships to second-tier distributers.  He says that there may be 11 weeks of inventory on hand at these distributers, which is an uncomfortably long time (RIMM typically has 30 days, AAPL far less).

Recent price action on the Pre at these distributers does seem to support the idea of an inventory glut.  Best Buy currently lists the Pre at $150, Amazon at $100, and Walmart went as low as $80, albeit temporarily.  Bear in mind that neither the iPhone 3G, 3GS or the Blackberry Tour have received any discounts so far, and they were all released at the same time.

Of the pair, Sprint releases their earnings earliest, at the end of October.  Should definitely be on the calendar of any PALM investor.

Disclosure: No position in Palm, Long AAPL and RIMM

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