Print 21 comment(s) - last by ThePooBurner.. on Apr 20 at 3:31 PM

The Palm Pre Plus is now only 1 penny, with a new two year contract, via
Buyers can get a free Pre Plus with 2 year contract on the Verizon network, from Palm

Hedge fund manager and former star hockey player at Harvard University Philip Falcone revealed in a regulatory filing on Tuesday that he had taken a 9.48 percent stake (16 million shares) in mobile handset maker Palm.  Falcone is known as an activist investor with his share of ups and downs.  In 2007 he became famous when he bet against subprime mortgages and his funded doubled.  In 2008, he reportedly posted a double digit loss after betting wrong on oil prices and being unable to short sell certain stocks thanks to new laws.  In 2009, though, he recouped posting a 45 percent gain.

After the announcement of Falcone's stake, Palm share jumped 10 percent, then settled down to a gain of 3.1 percent.

Palm can use all the help it can get.  Its stock is in shambles and it has a huge backlog of unsold handsets, which took take over a year to sell.  Palm's production is currently halted and there's no new handsets known to be in store for the second half of the year.

The company is resorting to fire sale tactics on the Verizon network, selling its Pre Plus smart phones at two for $49.99 and its Pixi Plus smart phones at two for $29.99 thanks to a price drop and Verizon's "Buy One Get One" promotion.  More incredibly, on you can get a single Pre Plus handset for $0.01 (the phone retails without contract for $699.99).  That phone also comes with free 3G hotspot capabilities (as do all Palm smart phones on Verizon's network).

Palm CEO Jon Rubinstein remains optimistic that the company will pull through this tough time.  The company has $590M USD in cash to weather the storm.  That cash also makes it an attractive acquisition target.  There's been rumors that Palm is looking to sell itself to the highest bidder and that HTC was among the interested parties.

Palm currently sits in fifth place on the smartphone market, behind Google, Microsoft, Apple and Research in Motion.

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RE: Going Long
By JasonMick on 4/15/2010 10:42:43 AM , Rating: 1
This is a pure hedging (pun intended) strategy wherein the firm expects the firm to be acquired. It probably has access to some insider information, so it'll short the acquirer's stock, netting the spread between Palm's then magnified stock price and the acquirer's discounted stock.

That cash also makes it an attractive acquisition target. There's been rumors that Palm is looking to sell itself to the highest bidder and that HTC was among the interested parties.

I think I make that pretty clear.

Obviously Falcone could either be betting on a turnaround or an acquisition. Either way the stock could rise substantially.

Of course if Palm stays independent by burning through its cash and continues to struggle, it will be a much less attractive target, even with its IP library. That's the risk of Falcone's investment.

Last thing DailyTech wants to do is accentuate the speculation, thereby, the spread, too...

I don't think that was the point here. Unlike the Reuters story on this topic that emphasizes the 10 percent gain, I point out that the stock only gained slightly. And I also analyze Palm's struggle in much greater depth.

Any intelligent investor reading this piece would realize that a position is a gamble hinging on either
a) An acquisition ...or
b) A turnaround
Either of which there is no guarantee will happen.

That all goes without saying, though, I believe.

Disclosure: I own no position in Palm or HTC.

RE: Going Long
By ThePooBurner on 4/15/2010 11:13:00 AM , Rating: 1
Disclosure: I own no position in Palm or HTC.

You don't have to have a position there to have stock in them or be a part of a mutual or hedgefund that does. :)

RE: Going Long
By JasonMick on 4/15/2010 11:16:06 AM , Rating: 2
Well I don't own stock in or hold any investments in hedge funds with major Palm holdings either...

RE: Going Long
By xmichaelx on 4/15/2010 7:31:24 PM , Rating: 2
You don't have to have a position there to have stock in them

He said he owned no position there, meaning that he owns no stock in them, genius.

RE: Going Long
By ThePooBurner on 4/20/2010 3:31:22 PM , Rating: 2
"Hi! My name is A Joke. You should really learn how to take me."

"My sex life is pretty good" -- Steve Jobs' random musings during the 2010 D8 conference

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