By Maisie Ramsay
Wednesday, September 23, 2009
Palm has raised its stock sale by 25 percent in a move to bring in additional cash to the troubled company, whose much-hyped Palm Pre has failed to deliver as expected.
Palm plans to sell off a minimum of 20 million shares at a price of $16.25 each, a 5 percent discount to Tuesday's closing price of $17.07. Last week that figure stood at 16 million shares.
The stock sale will bring in at least $313.1 million to the company, whose quarterly losses widened to $161.1 million last week on disappointing sales of the Palm Pre. Analysts expect the company to post losses for its 2010 fiscal year.
Morningstar analyst Joseph Beaulieu says it is "unlikely" that Palm will reach the 10-percent-plus market share positions of Apple and RIM.
"Palm's future is riding on the Pre," said Beaulieu in a recent report. "The company has heavily leveraged its balance sheet and issued additional shares as it prepared for the Pre launch. If the Pre flops, we think that Palm would generate large operating losses for the foreseeable future, may have trouble servicing its debt, and could be out of the running for good."
The Pre was widely touted as an iPhone killer but has sold just 1.3 million units since its June release. Apple's iPhone 3GS sold 5.2 million units in one quarter alone since it was released three days after the Pre.
Palm has no immediate plans for the cash, saying it was for "working capital and general corporate purposes." Palm shareholder Elevation Partners said last week it plans to buy at least $35 million in stock through the stock offering. Palm offered no update to Elevation Partners' purchase in today's announcement.