Palm Inc and Handspring Inc, two money-losing makers of handheld computers, both raised millions of dollars in extra cash this month.
Yet Handspring shares rose 15 percent on Wednesday after it sold stock for US$48.5 million, while Palm shares were unchanged on Dec. 7, when it announced the sale of a convertible note for US$50 million.
The varied response is partly because Palm took the unusual step of keeping the identity of its investor secret. Handspring's backers included Qualcomm Inc, whose investment was seen as an endorsement of the company's strategy to make devices that contain cellphone functions. Investors get jittery when companies such as Palm withhold information, analysts said.
"If you're a serious investor and you don't know what's going on, of course you start to get nervous," said Paul Coster, an analyst with JP Morgan, who rates Palm "market perform" and doesn't own the shares.
Palm, the biggest maker of handheld computers, has lost money for three quarters in a row. The company had cash of about US$242 million as of Nov. 30.
Santa Clara, California-based Palm says the investor doesn't want to be identified.
"We have to respect the wishes of our strategic investors," said Eric Benhamou, Palm's chairman. "If you spend a few minutes trying to put two and two together, you will find out who it is."
That leads some analysts to speculate that Palm's benefactor was chipmaker Texas Instruments Inc. Palm said on Monday it will use Texas Instruments chips in a new line of products, bypassing current providers Motorola Inc and Intel Corp. Texas Instruments may have used the investment to swing the decision in its favor, analysts said.
"It wouldn't take much to convince me that TI was the donor," said Tom Sepenzis, an analyst with CIBC World Markets, who rates Palm "buy" and doesn't own the shares.
Since the investment, Palm's shares have fallen 6.7 percent, in part because the NASDAQ Stock Market removed the stock from its NASDAQ 100 Index this week, Benhamou said. The shares rose US$0.01 to US$3.47 on Friday.
Palm said the US$50 million note is convertible into stock at US$4.63 per share. The company hasn't filed regulatory statements related to the note that normally contain detailed information, including any special conditions.
Many investors view the investment positively because it eases concern the company may run out of money before returning to profitability, said Tim Gaumer, a senior equity analyst with Transamerica Investment Management, which earlier sold its Palm stake.
"Is there a question mark about who the investor was and why it wasn't disclosed? Sure, but that's secondary to the positive news about strengthening the balance sheet," Gaumer said.
Palm has sold shares to other companies before. Motorola Inc, Nokia Oyj and AOL Time Warner Inc all bought stakes at the company's initial public offering in March 2000.
For some, the latest investment raises as many questions as it answers.
"This whole anonymous investor thing just creates speculation and adds an element of uncertainty," said Michael Kim, an analyst with Robertson Stephens, who rates Palm "market perform" and doesn't own shares. "It just all seems kind of bizarre."
RSS