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Analyst talks up Handspring

But PalmOS licensees' marketshare fell in June

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Analyst Thomas Sepenzis of CIBC Oppenheimer got his name in the papers this weekend by generating a 22 per cent hike in PalmOS licensee Handspring's share price on Friday.

Demand for Handspring stock burgeoned after Sepenzis said he expects the stock to outperform Palm's own, and that Handspring will show higher revenue and earnings growth than its rival.

"While Palm is the market-share leader, we believe that Handspring will show the greatest revenue and (earnings) growth, and therefore believe it should be trading at a premium," he said.

The irony is that Handspring was founded by Palm's founders, Jeff Hawkins and Donna Dubinsky. They bailed from Palm in 1998 after first selling it to US Robotics and they seeing that company taken over by 3Com. It is believed the pair were unhappy with the corporate direction in which the parent company wanted to take Palm, preferring to set up on their own to pursue their own, mass-market course.

Palm, of course, recently IPO'd, restoring its status as an independent company.

Sepenzis said he expects Palm's share price to hit $65, but Handspring's will reach $70. He rated Handspring stock a Strong Buy, and said he expects it to record a loss of 13 cents a share on revenues of $61.4 million for its current fiscal quarter. Handspring's sales will grow by at least 75 per cent over the next three to five years, he predicted.

Back in May, Handspring took 25 per cent of the US retail and mail order PDA market, according to researcher NPD Intelect. In June, however, that figure fell to 21.5 per cent. Palm's share also fell slightly, dropping from 71.1 per cent to 65.4 per cent. The gainers were Hewlett-Packard, up from 2.6 per cent to 3.3 per cent, and NEC, which grew from a sub-one per cent share to two per cent, knocking Compaq out of the top five. That said, fellow WinCE-er Casio saw its share drop one per cent to 4.4 per cent.

That was June, and since then Sony has launched its PalmOS-based PDA to much fanfare, and Handspring has announced new colour and cellphone-enabled devices of its own, so we'd expect PalmOS' share of the market to moving upwards again. ®

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