Beleaguered Palm, other second-tier Silicon Valley tech companies face uphill battle for survival

“The recent revelation that Sun Microsystems might be devoured by IBM raises questions about the future of other second-tier Silicon Valley tech companies, which, like Sun, were struggling even before the recession and are now fighting for their survival,” Steve Johnson reports for The San Jose Mercury News.

“Economic downturns are traditionally tough on such companies, which have far less ability to withstand periods of declining sales than their larger competitors. The Mercury News chose to look at three that were placed just this month by credit-rating firm Moody’s on a list of businesses teetering toward default: Palm, Advanced Micro Devices and Quantum… it could be a rough road ahead for Palm, AMD and Quantum, given their financial problems,” Johnson reports.

“if the Pre doesn’t sell as well as Palm hopes, the company could be in trouble. In recent years, Palm has stumbled and now trails in the smart-phone market behind the likes of Apple and Research In Motion. ‘Historically, execution problems with new product launches have tripped Palm up,’ said James Faucette, an analyst with investment bank Pacific Crest Securities,” Johnson reports.

“In releasing its earnings Thursday for Palm’s third fiscal quarter, CEO Ed Colligan declared in a prepared statement, ‘We’re poised to usher in a new era.’ Yet Palm, which listed 1,050 employees in its latest annual report, has been chronically unprofitable. It lost $95 million for its third fiscal quarter, considerably worse than the $54.6 million it lost during the same period a year ago,” Johnson reports.

Full article here.

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