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Local Tech Wire
SAN FRANCISCO — MarketWatch columnist Therese Poletti raised the question Tuesday of whether all the talk in recent days of Palm (NASDAQ: PALM) putting itself up for sale has driven share prices so high that no one could afford to do the deal.
"Palm investors might be relieved to see the jump in their beleaguered shares over the past few days, but that happiness may be fleeting if – in fact – the troubled company has a buyout in the works," Poletti wrote.
The same thought may have occurred to investors, who by late morning Tuesday had sent the high-flying share down 12 percent, or 70 cents, from their Monday close at $6.04. They were a bit under $4 at the end of March.
In the past week, the handheld device maker’s share price has risen about 60 percent.
"The problem is," Poletti said, "all the deal talk may have made the company too expensive for a potential buyer to be able to justify. ‘If we were to use $6.50 a share, that inherently calls for a take-out value of $1.5 billion,’" she quoted Matthew Thornton, an analyst with Avian Securities Inc., as saying. He noted that many estimates of Palm’s current valuation do not factor in the preferred shares held by private equity firm Elevation Partners and stock options.
The company announced a few weeks ago that its fiscal fourth quarter revenue would be less than half of expectations.
It’s Pre and Pixi smart phones have not been selling as well as Palm had hoped, though the company is generally praised for its operating system, which observers say can compete with Apple’s iPhone and Google’s Android systems.