Shares of Palm Inc. (PALM) sank more than 12 percent on Monday as investors learned top exec Michael Abbott has resigned and a broker predicted the struggling company won’t be willing or able to sell itself.
Palm said in a Friday filing with the Securities and Exchange Commission that Abbott, senior vice president of software and services, will leave on April 23. Abbott led development of Palm’s WebOS operating system, the technology thought to be the company’s most valuable asset. It’s the platform that runs on the Pre and Pixi devices, which are recording poor sales through carrier distributors Sprint Nextel Corp. (S) and Verizon Communications Inc. (VZ) Palm’s smartphones are facing stiff competition from the iPhone, Droid and other rivals.
Abbott’s departure deals yet another blow to Palm, which has hired bankers to explore a sale. But one analyst, Tavis McCourt at Morgan Keegan, said late last week he doubts a sale will happen; McCourt then downgraded Palm to underperform. The loss of Abbott, on top of Palm’s financial incentives to retain certain company officials, does not “inspire confidence about Palm’s ability or willingness to sell out at a premium valuation in the near term,” McCourt wrote in a note to clients. A buyout, he added, “would appear less likely on these actions, while Palm’s ability to execute a turnaround internally remains difficult.”
So far, Palm is reported to have spoken with Huawei Technologies in China about an acquisition, while other interested parties are said to include smartphone maker HTC and PC manufacturer Lenovo. Those options seemed to stop resonating with investors, however. In the past week, Palm’s shares have soared to near-record highs as Wall Street reacted well to those takeover possibilities. But on Monday, shares of Palm tanked, landing at $4.91, a 12.16 percent drop, by 1:12 p.m. Eastern.
Speaking of financial incentives, Palm has handed stock packages and $250,000 in cash to the senior vice president of operations and to the CFO. The actions indicate that other executives might be looking to follow Abbott’s lead and Palm is desperately trying to keep its brain trust intact. Indeed, on Monday, Palm filed a number of forms with the SEC showing that it’s distributing large quantities of shares to almost every executive. That could mean a Palm takeover is in the works; buyers don’t want to purchase companies where the top brass have all left, creating an institutional memory-void.