RIMM, PLMO - When does the channel say "No Mas" !
Channel stuffing -CNET
Several analysts are expressing concerns about "channel stuffing," saying that there is far too much inventory sitting on the shelves of retailers and distributors at a time when consumer spending is decreasing. Channel stuffing refers to when companies continue to ship their products to distributors and retailers, despite a slowdown in demand.
"Clearly, the impact to Palm will be in the next quarter where Palm will have to work off channel inventory by slashing production, reducing sales into the channel, and providing incentives to stimulate sales out" of the channel, UBS Warburg analyst Don Young wrote in a research note.
Gartner analyst Abha Garg says Palm will have to continue to build revenue in Palm operating system licenses and other segments to guard against pressure on its hardware revenue. Even analysts who were upbeat about the stock noted that the company will have a tough time resolving its inventory issue as it launches new products.
Palm saw its cash levels drop from $743 million in its second quarter to $596 million during its third quarter. Meanwhile, inventory increased from $34 million to $102 million in its third quarter, according to Bear Stearns analyst Andrew Neff. While a decline in consumer spending is hurting Palm's core market, the company is also being squeezed by cuts in corporate budgets.
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