UBS analyst downgrades Palm to "Sell"

In a client note, UBS analyst Maynard J. Um lowered his rating and kept his $5 price target for the shares.

The analyst said that while recent launches of its low-priced Centro model at various wireless carriers seem on track, confirmed and expected launches from competitors Research In Motion Ltd. and Apple Inc. "are likely to create a near-term overhang."

Like many analysts, Um expects Apple to launch an iPhone that utilizes 3G, or third-generation, wireless technology in June. He also noted that Research In Motion Ltd. recently announced a new BlackBerry model that will be available in coming months.

"We believe Palm's turnaround still relies on the success or failure of its new Linux product, which we believe will be launched in the first half of 2009 at the earliest. The biggest risk remains execution (launch timing, average selling price, carrier partners, developer support, etc.)," he said.

Palm shares rose 8 cents, however, to close at $5.90. Earlier in the session, shares fell as low as $5.56.