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Handspring shares get help from underwriters

Handspring (Nasdaq: HAND) continued to gain Tuesday as its IPO underwriters applauded the stock's prospects. The company's quiet period ended Monday.

Shares in the wireless device maker, which competes with Palm (Nasdaq: PALM), were up 6 15/16 to 46 1/4 Tuesday. That pop follows a decent run on Monday.

Typically, a recent IPO gets a pop once its 25-day quiet period ends. Once the quiet period ends, company management and its IPO investment bankers are allowed to talk up shares. The practice, which is predictable, hasn't worked for many recent issues, but Handspring is getting some mileage out of the underwriter kudos.

Credit Suisse First Boston, the lead underwriter for Handspring's IPO, called the stock a "buy," and had an earnings estimate for fiscal 2000 of 68 cents a share, and for fiscal 2001 of 60 cents a share.

"With its addressable market growing at 45 percent and as a pure play in the exponential growth of the handheld market, Handspring is a core holding for aggressive investors,'' analyst Marc Cabi said.

U.S. Bancorp Piper Jaffray, also an underwriter for the deal, initiated coverage with a "strong buy" rating. Analyst Sam May also set a a target price of $90 a share on the stock, which is based on a 17 times multiple of calendar 2001 revenues of $507 million.

"Handspring has strategically positioned its product line to exploit a market that we believe is going to witness incredible growth over the next three to five years,'' May said.

IDC estimates that the PDA market will grow to $3.1 billion this year, up 34.7 percent from last year's $2.3 billion. This market is expected to grow to $4.8 billion by 2002.

"In our view, the company's senior management team represents a significant strategic advantage,'' said May. "Donna Dubinsky (CEO) and Jeff Hawkins (CTO), the business/innovative brain trust of Handspring, are the same team that led Palm Computing (3COM) and launched the highly successful Palm and Palm OS.''

The two other underwriters, Merrill Lynch and Donaldson Lufkin & Jenrette, rated the stock "long term buy" and "buy," respectively.