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March 21, 2005 Stock Pick: palmOne, Inc. (PLMO)

Stock Price: $22.15

We first released PLMO as a stock pick on December 9th of last year when it was at $38.13, and predicted it would hit $45 by the end of the year (2004). On December 14th, PLMO reached a new 52-week high at $46.65.

palmOne, Inc. formerly known as Palm, Inc. is a developer, designer, and marketer of Palm-branded hand-held devices and accessories. Palm, Inc. combined the assets of Handspring, Inc. (HAND) and Palm hardware division to form palmOne, Inc. (PLMO). The software division of Palm containing the operating system was spun-off into PalmSource, Inc. (PSRC).

PLMO was dropped on Friday after a disappointing fourth quarter forecast slightly off of analyst estimates. The company is dependent on the success of the Treo; however, much of this is already priced into PLMO.

Good news supporting the Treo could send shares much higher as it has done in the past. We believe people will continue to move to smart phones such as the Treo because it is a personal digital assistant and phone in one. This is a natural step forward and the Treo is where many consumers will look.

This is the third time in the last two months that PLMO has been down at this level. It has bounced back each time, we believe there is little downside risk at this level.

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