Palm shares decline on competition fears

Palm shares decline on competition fears; S&P cuts price target

• On 2:29 pm EST, Wednesday November 4, 2009

NEW YORK (AP) -- Shares of smart phone maker Palm Inc. fell Wednesday as fears of rising competition picked up.

Standard & Poor's Equity Research analyst James Moorman chopped his price target for the company's shares to $10 from $12, telling investors in a note that "the upcoming holiday selling season will be very competitive for handset vendors."

The latest threat comes from Motorola Corp.'s new phone, a device called the Droid that runs on Google Inc.'s Android operating system. Motorola, in the midst of a turnaround effort, will now have two Android phones on the market for the holiday shopping season.

It joins an already crowded field that includes Apple Inc.'s popular iPhone, several models of the BlackBerry by Research in Motion Ltd. and others.

Moorman said Palm is handicapping itself by leaving such a small difference in price between the Palm Pre and the smaller Pixi, a cheaper phone that comes out Nov. 15. With a service plan and rebate, the Palm costs about $150, while the Pixi will sell for $100. He said that "could limit Pixie sales and confuse consumers during the launch."

He reiterated a "Strong Sell" rating on the company.

Palm shares fell 61 cents, or 5.4 percent, to $10.75 in afternoon trading.

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