Palm turnaround concerns analysts

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Palm shares have come under pressure after the publication of analyst comments and a downgrading of its stock amid concerns that it will need to raise more cash.

The smartphone maker, which is undergoing a restructuring process, had already seen its shares drop roughly 50 per cent this year.

Morgan Keegan analyst Tavis McCourt said in a note that he expects Palm's cash balance to fall to just $75 million (£46.87 million) in 2009 as it launches its long-overdue new software platform to replace the ageing Palm OS.

Its cash balance was $248 million at the end of August.

"We are increasingly concerned that Palm has little room for additional missteps prior to its new platform launch next year without needing to raise additional capital," McCourt said, noting that Palm filed a shelf registration on Monday that would allow it to issue debt, stock or other securities to raise funds.

"Although needing additional capital (if it comes to that) is not the end of the world for Palm, given its deep-pocketed backers at Elevation Partners, it is impossible to determine ultimately how dilutive such a capital infusion may be to common shareholders," McCourt said.

Private equity firm Elevation Partners bought a 25 per cent stake in Palm last fall for $325 million.

McCourt said Palm, maker of the Palm OS-based Centro and the Windows Mobile-based Treo smartphones, is on track to release more hardware and its new operating system in mid-2009.

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