Last fall, palmOne’s share price had fallen to the point where it had to do a reverse stock split. This decreased the number of shares available and thereby increased the value of each individual share. This move was forced on the company by the fact that shares were then selling for 66 cents. The NASDAQ stock exchange de-lists companies whose shares sell for less that $1 for too long.
What a difference a few quarters makes. This spring, the stock bottomed out at $9.53 and has been climbing ever since. It closed yesterday at over $40, which is more than double the price at the time of the reverse stock split.
Over the past several years, many palmOne executives had been granted what once seemed like worthless stock options. With shares trading at so low a price, these options gave the bearer the right to buy palmOne stock at more than it was currently selling for. With the stock performing so well this year, several company executives have finally made some money with their options. For example, last month Kenneth Wirt, palmOne’s Senior Vice President of Worldwide Marketing, used his option to buy almost 21,000 company shares at well below the current market price. He turned around and sold them on the same day for a profit of $485,000.
The Reason for the Climb
It’s no mystery why palmOne’s share price is up so dramatically. It can be summed up with one product: the Treo 600.
This smartphone is selling so well, palmOne is struggling to meet demand for it. Still, it is making enough of them and its other products that it was able to make a profit of $13.3 million, or 27 cents per share, during its most recent financial quarter.
The Treo 600 accounted for 28 percent of palmOne’s last quarterly revenues, but company executives are so optimistic about its prospects in the smartphone market that they predict that, by the end of this year, 50 percent of palmOne’s revenues will be from the Treo line.
One of the people who has benefited from palmOne’s rising share price is Jeff Hawkins. He recently sold about 7,500 shares for $268,000. But this seems only fair, as it was his company, Handspring, that originally designed the Treo 600. Handspring became a part of palmOne last fall.