Palm, Handspring Fall as Analyst Cuts Targets

Handheld computer makers Palm (Nasdaq:PALM) and Handspring (Nasdaq: HAND) fell in morning trading Monday following reports that Lehman Brothers slashed itsprice targets for the stocks.

At midmorning, Palm was down 61 U.S. cents at $7.12, while Handspring wasdown 69 cents at $10.26.

Lehman analyst Joseph To reportedly lowered his price target for Palm sharesto $11 from $25 because of recent price cuts for the Palm VII. The analyst also reportedly cut hisforecast for Palm rival Handspring (Nasdaq: HAND) to $18 from $28.

Reports of a Lehman downgrade sent Handspring shares plunging earlier thismonth. On May 3rd, To was reported to have told clients that Palm’s decisionto slash prices could end up hurting both companies if Handspring were tofollow suit and a price war were to break out in time for the critical Father’s Day and graduation sales period.

The two companies have reportedly been lowering prices on popular modelsamid a glut of inventory. Palm makes the PalmPilot handheld computer, whileHandspring manufactures the Visor line of devices.

Palm and Handspring, though rivals, are working together to develop newproducts. The two renewed a license agreement last month that letsHandspring continue to work with the Palm OS operating system through April2009. Handspring, which went public last year, was started by former Palmexecutives.

Last month, Handspring reported a 261 percent year-over-year jump inrevenue as strong demand for new high-end products boosted sales. Thecompany posted a net loss of $27.2 million, or 26 cents per share.

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