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Comments on: Palm Announces Stock Buyback Program

Palm today announced that its board of directors has approved a stock buyback program of up to $250 million of its common stock. The share repurchase will be funded using the company's existing cash balance and future cash flows.
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Sad, very sad

fishtastic @ 9/21/2006 5:36:56 PM # Q
Share buy-backs have obvious uses but it basically says that here is a company that believes that investing more in R&D or buying other businesses is not worthwhile. That a buy-back will have a larger effect on the share price than investing in growth.

Sad.....

Fish

RE: Sad, very sad
craigdts @ 9/21/2006 5:55:31 PM # Q
The stock buyback appears to be a threat to stop the stock from dropping. We will see if wallstreet calls palm's bluff in the next few days.

It wasn't too long ago that colligan was against a buyback because they had better things to do with their money.

Sounds like this was forced.

RE: Sad, very sad
VampireLestat @ 9/21/2006 7:15:10 PM # Q
Buy back stock = stabalise stock = sell company easier.

It tells potential company buyers: "Buy us! Your investment is safe! Besides, we will soon force everyone over to WM Treos."

RE: Sad, very sad
SeldomVisitor @ 9/21/2006 7:17:38 PM # Q
Might explain the current lack of Form 13Gs by FMR, Unicredito, and Nelson.

Then again, they have 10 days...

RE: Sad, very sad
craigdts @ 9/21/2006 10:28:56 PM # Q
Here is palm's problem - the smartphone market is not ready for growth yet. So increased competition means fighting for the same group of customers (sound familiar? this happened with PDAs)

My disappointment is that palm did not create a NEW market by spitting out low end treos that brought NEW markets in.

RE: Sad, very sad
hkklife @ 9/21/2006 10:44:44 PM # Q
Some of that buyback money could be better used to develop new product (new PDAs)or fix existing ones (TX or 700P ROM updates?). I don't think Palm'll be sold in 3 months but I'd definitely say between now and this time next year. I see the remainder of '06 and the first half of '07 as a huge water treading period for Palm. Sad, sad, sad.



Pilot 1000-->Pilot 5000-->PalmPilot Pro-->IIIe-->Vx-->m505-->T|T-->T|T2-->T|C-->T|T3-->T|T5-->TX-->Treo 700P

RE: Sad, very sad
SeldomVisitor @ 9/22/2006 8:14:25 AM # Q
> ...Might explain the current lack of Form 13Gs by FMR,
> Unicredito, and Nelson.
>
> Then again, they have 10 days...

Indeed, they do.

Nelson just filed the equivalent report about selling a significant part of his stake; like Sagio, he sold BEFORE the earnings announcement.

We'll see about Unicredito and FMR, eh?


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Palm will be sold within 3 months. Period.

The_Voice_of_Reason @ 9/21/2006 9:21:32 PM # Q



If you were Palm and wanted to keep you marley cap atrificially inflated what would you do? How about pumping up the stock price with a buyback?

Only problem is the emperor has no clothes. Palm's true value is more like HALF what its stock currently trades for. Last year we saw naive Access get suckered into hugely overpaying for PalmSource. Will history repeat with Palm? Ask the magic 8 Ball...


TVoR

RE: Palm will be sold within 3 months. Period.
VampireLestat @ 9/21/2006 11:05:03 PM # Q
It would be hilarious if Access bought Palm Inc.

This year will be the first time in 10 years, since the founding of the company, that Palm has not released a new pda in the fall in order to tap into holiay season.

They are 100%, utterly, absolutely, all, altogether, entirely, exactly, extremely, fully, in toto, just, perfectly, plumb, purely, quite, thoroughly, totally, well, wholly...

--------
retarded
--------

RE: Palm will be sold within 3 months. Period.
The_Voice_of_Reason @ 9/21/2006 11:05:34 PM # Q
If you were Palm and wanted to keep your market cap artificially inflated what would you do? How about pumping up the stock price with a buyback?

Only problem is the emperor has no clothes. Palm's true value is more like HALF what its stock currently trades for. Last year we saw naive Access get suckered into hugely overpaying for PalmSource. Will history repeat with Palm? Ask the magic 8 Ball...


TVoR


RE: Palm will be sold within 3 months. Period.
craigdts @ 9/21/2006 11:14:17 PM # Q
Not sure that using cash to prop the stock up makes sense for a buyout.

If palm is undervalued then at this point the price won't matter it will be bought for what a company thinks it is worth. Artificially inflating the price isn't going to make a company pay more. Think Access and psrc

RE: Palm will be sold within 3 months. Period.
VampireLestat @ 9/21/2006 11:42:11 PM # Q
Access went mental and overpaid for PalmSource. We might be seeing why now. Their ultimate goal might have been to force Palm Inc. out of the market as a competitor, knowing that without the rights to the famous Palm OS, Palm Inc was worth nothing as a VAR (value added reseller).

I have a funny feeling that the Palm Inc. vs Access negotiations for the pseudo full rights to Cobalt failed and that is why there is a rumour that Palm Inc. is up for sale.

All rumours, speculation and opinions mind you.

RE: Palm will be sold within 3 months. Period.
SeldomVisitor @ 9/22/2006 8:17:19 AM # Q
> ...Not sure that using cash to prop the stock up makes sense for
> a buyout...

We do not know what went on inside the Boardroom during the Buyback Vote, however two directors are "Not standing for re-election at 2006 Annual Meeting of Stockholders" in a few days.


Reply to this comment

Please explain how a share buyback is additive

craigdts @ 9/21/2006 11:51:43 PM # Q
Isn't the cash value palm has already baked into the stock price?

why would shifting the cash around to stock make it any more valuable? In fact it actually seems like throwing away money. It's like you have nothing to show for spending your money, except a weakened balance sheet.

How $250 million in stock is greater than $250 million in cash:
The_Voice_of_Reason @ 9/22/2006 12:21:25 AM # Q
why would shifting the cash around to stock make it any more valuable? In fact it actually seems like throwing away money. It's like you have nothing to show for spending your money, except a weakened balance sheet.


Pretend there's a company - let's call it Sole - that is seeing its only source of income evaporate right before its eyes and the company realizes this is only going to escalate. The company needs a buyout to survive. But investors are a twitchy group. If Sole announces it has poor longterm prospects and that sales are going to implode over the next 6 months, investors will panic and stampede for the doors, quickly trampling Sole's value before it can get sold off to a potential suitor. Value could drop from, say $15/share to $7.50/share. Overnight. Seeing Sole's value nosedive creates a negative feedback loop, resulting in even further rapid decline in perceived value. Before you know it: Hello penny stock! Hello Pink Sheets!


Now if Sole buys back, say 15% of the company for $250 million, they MIGHT artificially float the company "value" long enough to get a PalmSource-style buyout completed. Sometimes (actually USUALLY) on-hand cash adds less to company "value" than what you actually DO with that cash. Successful tech companies (like Microsoft and Apple) invest their cash in R&D to ensure they will have future products consumers consider worth buying. Unsuccessful tech companies (like Sole) use their cash for corporate games like buying the rights to the "Sole" name and keeping their stock price on life support.

Sole sucks codemonkey balls™.

TVoR

RE: Please explain how a share buyback is additive
VampireLestat @ 9/22/2006 1:14:51 AM # Q
PalmInc stock dropped 7.11% in 24 hours yesterday.

My explanation of share buyback:
Ficticious example.

Say in Aug 2006, Palm controlled 30% of all the Palm Inc. shares, and say investors controlled 70%.

If for whatever reason investors panic, they will all run like lunatics to sell all their shares. 70% of the whole Palm Inc company can be sold, thus a huge part of the company is dependant on how investors feel/decide.

Say Palm wants to sell Palm Inc. They know that 70% of their company is controlled by investors, therefore they have to use all kinds of confidence inspiring fancy words, promises, exagerations about future earnings, etc all to keep them 70% people calm.
But lets say Palm wants to sell and they know that no amount of public relations is enough to keep all those people calm and they expect that thos 70% will go out and panic and sell their stock? If they do, the Palm Inc company is worth less to a new potential buyer. Would you buy a company for which 70% of the investors panic? You would think they must know something that you should know right?

So what is the solution? What Palm Inc could do is taken away lots of power from those 70% undependable money grabbing unstable investor/lunatics. How? BUY THE STOCK FROM THEM 70% GUYS AND TAKE THE CONTROL AWAY FROM THEM. So lets just say Palm succeed in controlling 60% and the investors then only control 40%. If panic sets in, only 40% of Palm Inc can be under attack BECAUSE PALM INC WILL NOT SELL ITS OWN STOCK AND THUS CREATE MORE PANIC THEMSELVES.

Then you might ask, well how can Palm buy stock from people who already own it? Answer:

1) open market purchases; ie just go out and buy brand spanking new stock like me and you can anyday by calling our broker.

2)privately negotiated transactions; ie Palm goes to current 70% investors and says: "Umm we want to buy your Palm stock back. We will make it worth your while! We will give you a profit margin right now!"

If Palm wants to sell the company, they have to give the impression Palm is worth lots of money and is stable. One of the ways is to take away power from wild stock market investors.


RE: Please explain how a share buyback is additive
VampireLestat @ 9/22/2006 1:36:06 AM # Q
But of course, if an investor is smart and understands why Palm is buying back stock i.e., because they might get scared, then they might panic and sell. They might want to sell all the stocks back to Palm in a hurry, but remember that Palm cant buy back all of its stock because they simply dont have enough $$$ to do that. So what might happen is that a panic might still happen and have a major impact in dropping the stock value.

Remember, Palm stock dropped a full 7.1% in 1 day yesterday.

Also, potential buyers interested in buying the Palm Inc company will likely analyse why Palm is buying back its own stock. Is Palm trying to hide something? They will ask themselves that. That is why some people in this forum are talking about Palm trying to give FAKE VALUE to itself ie. giving the impression Palm Inc more stable that it actual is.

RE: Please explain how a share buyback is additive
VampireLestat @ 9/22/2006 1:51:06 AM # Q
And finally, some of you might also wonder...

OK then why doesnt Palm just always own 100% of its stock and avoid the instability caused by wild stock market investors"

Answer:
1) because those stock market investors have mountains of cold cash that Palm can use right away to invest in R&D, they can use it to spread Treo into new market, pay for ad campaigns (Palm just announced a big campaigns in fact for very soon). Or they can just use investors money as security blanket; for example, say Palm releases a Treo that is a disaster and they all have to be recalled, thus costing Palm endless millions of $ in lost revenu; they might not go broke and brankrupt because they are using investors $ as a protection to pay for the returns.

2) If Palm owns 100% of its stock (which is impossible in reality since it would not be a publically traded company) then its a family style company and not a public company; if the company goes bankrupt, then the sole loss falls 100% onto an individual or consortium of investors (aka little group). When you are on the open stock market, you are a public company, and if your company goes bankrupt all the investors take the loss.

RE: Please explain how a share buyback is additive
SeldomVisitor @ 9/22/2006 8:28:59 AM # Q
[Noted elsewhere but relevant here, too]

Sagio and Nelson, major stockholders in PALM, sold off all or a significant portion of their PALM holdings days before the earnings announcement.

I wonder who bought their shares?...

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