It was over lunch at Terra, a tony restaurant in Greenwich, Conn., when Kimberly Blank first realized she had Palm envy.
“We were making plans for a friend’s birthday lunch and all three of my friends whipped out their Palm Pilots,” says Blank, a 30-year-old stay-at-home mother married to a portfolio manager at a big hedge fund in town. “I thought, `Gee, I’ve got to have one of those.”
Take a stroll around Greenwich and other upscale cities these days, and you’ll see lots of scenes like the one at Terra. In grocery stores, on playgrounds and at volunteer meetings, many of the affluent wives of the fund managers and Wall Street executives who reside there either have a Palm Pilot in their purse — or are clearing a space for one.
“All the Greenwich wives want them for Christmas,” says one big hedge-fund manager in town.
It all signals that Palm Pilots, once used primarily by businessmen, could be on the cusp of entering the mainstream as a personal organizational tool. It also helps explain why shares of Palm, which makes the devices, are up about $32 mid-August to nearly $67 in trading Friday. Seeing open-ended revenue opportunity for the company as its product appears ready to make the leap to the mass market, some analysts and investors have gone ga-ga over Palm shares.
“This is my favorite stock,” says Paul Sagawa, a wireless telecommunications analyst at Sanford Bernstein, who is bearish on the telecommunications industry he covers but rates Palm’s shares an “outperform.”
Taking a page from the investment strategy of Peter Lynch, the legendary Fidelity Investments fund manager who preached buying stocks you know, Sagawa’s enthusiasm for Palm shares grew after he bought his wife the hand-held computer for their anniversary in May.
“She uses it to keep track of her friends, and telephone numbers, schedules and this and that,” says Sagawa. “She loves it.”
He believes the Palm will be a red-hot item for Christmas. “This is not just for business people. We’ve just touched the tip of the iceberg,” he says.
Even with its recent runup in price, Palm Pilot stock is inexpensive, says Sagawa. “The stock has enormous potential upside,” he says.
Of course, some investors wouldn’t touch shares of Palm with a 10-foot stylus. Some say it’s a hardware company with a commodity product. And for some investors, the big worry is whether Palm will be able to maintain its stronghold on market share as competition in the industry increases.
Still, the believers appear to be growing. “We started out with the idea that there would be a winner take all,” says Sagawa. Now, he says, investors are realizing a segmented market may be more likely. “People want a small phone to stick in their pocket and an item with a larger screen to do e-mail” and other tasks, he says. “The Greenwich wives want their StarTac phones and their Palm Pilot, too.”
Indeed, for many women these days, it’s good-bye, Filofax — those old-style spiral-bound organizers. “One month ago, I forced myself to throw my Filofax out. It killed me, I was so attached to it,” says Cordelia McKenna, who lives in Greenwich. She now uses her Palm to keep her personal life organized.
Says Blank, who is shopping for a Palm these days: “I have a $1.99 notebook in my purse that I keep my phone numbers in. A Palm’s more expensive, but I could download directions to a playdate from my computer on it.”
It’s all part of the change in how, and by whom, hand-held computing devices are being used. At first, it was the so-called early adopters — typically men who take quickly to new technologies — who were drawn to the Palm Pilot. Sure, plenty of women, especially businesswomen, have used hand-held computers as well. But in the products’ first couple of years on the market, non-working women generally shied away from the Palm Pilot and other hand-held computing devices.
Now, the Palm is beginning to be viewed as not only affordable but also, increasingly, as both a status symbol and a fashion statement.
In Greenwich, for instance, it is the slim and sleek newer models — the Palm Pilot Vx and Palm Pilot VIIx — that are highly coveted. (They both cost about $399.) All the better for the status-minded that the newer models are hard to come by because of component shortages.
And in another sign of the Palm’s elevation to status symbol, some women in Greenwich are paying as much attention to the case they put their Palm in as they do to the applications on it. “You have to have the right case,” says Blank. “Coach is too bulky. If you are going to buy the Coach, you may as well buy the thick Palm.”
She has her eye on a Louis Vuitton case, which she describes as “soft and wallet-like.” McKenna picked up a $200 black crocodile case for her Palm V. “I went back and forth on the cover,” she says. “I bought a couple off the Internet and a couple from Staples.” Finally, she says, “We took a trip into New York City just to get the (crocodile) cover.”
Indeed, the Palm Pilot is a case study in how a pricey electronics item moves from low market penetration to the mass market. Granted, the anticipated transformation is in the early stages. There are, after all, only about 7 million Palm Pilot units in the hands of consumers, representing about 80 percent of the worldwide market for the devices. Compare that to the 600 million cellular phones on the market worldwide.
The trend’s infancy is, however, part of the excitement among investors about shares of Palm. Other hand-held electronic-device stocks, not to mention software companies that supply them and other ancillary stock plays, are on the move as well, with big leaps for Handspring and Research in Motion, which makes the BlackBerry pager, popular with Wall Streeters.
“Right now, the trend is very business- and Wall Street-oriented,” says Seth Tobias, who manages Circle T, a hedge fund. “But the consumer is shifting to hand-held devices, and we’re just seeing the beginning.”
Tobias says he has owned shares of Palm “on and off over the last six months,” and has been buying the stock again lately. He also owns shares of Handspring and is waiting for Research in Motion to dip a bit lower before he begins buying again.
“Palm’s numbers are only getting better,” he says. “Prices are coming down, and the number of units sold will go up.” Indeed, Palm recently rolled out a less expensive model, the m100, which sells for about $150, which is helping to propel the product into the hands of mainstream consumers.
“When you see price points coming down, you begin to hit critical mass, and when you see enough people running around with these, you begin to want one,” says Lehman Brothers analyst Dan Niles, who hasn’t yet picked up coverage of Palm. “You’re beginning to see women pulling them out of their purse as they are getting the kids out of the car.”
Niles’ wife, Jennifer, also recently got a Palm Pilot. “She saw mine and she got tired of carrying her notebook (with telephone numbers for her cellular phone) around,” he says.
