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Palm, eSpeed race ahead on bullish outlook

Positive news goads analysts to draft bullish reports on the handheld computer giant and virtual marketplace builder eSpeed.

Positive news goaded analysts to draft bullish reports today on virtual marketplace builder eSpeed and handheld computer giant Palm.

eSpeed's three favorable broker reports came a day after the company announced it would become a leading partner in TradeSpark, an online trading site for seven of the biggest U.S. energy trading companies.

Companies backing New York-based TradeSpark handle about 20 percent of the gas and electricity traded in North America. TradeSpark will likely employ about 50 people and allow clients to buy and sell goods and services online, through eSpeed's network and through brokers.

TradeSpark is expected to start trading natural gas, electricity, coal and weather derivatives on Oct. 2, an eSpeed spokesman said yesterday. Participants include Williams and a unit of the Royal-Dutch/Shell Group.

New York-based eSpeed is controlled by the investment firm Cantor Fitzgerald. Energy companies Dynegy and Williams each bought a $25 million stake in eSpeed in June.

Based partly on the new energy marketplace, U.S. Bancorp Piper Jaffray and Chase Hambrecht & Quist reiterated their "strong buy" ratings on eSpeed this morning. Bryan Keane at Prudential Volpe Technology Group reiterated his "strong buy" rating and his 12-month target price of $68 per share.

eSpeed stock was trading at $28.38 this morning, up 3.7 percent since yesterday's closing price. But the company hasn't bucked the downward stock spiral that has afflicted many companies in the business-to-business e-commerce niche, which was severely battered in the spring tech wreck on Wall Street.

After going public late last year, the company has lost 20 percent of its value since the beginning of the year and 9 percent of its value since the beginning of September.

Stock in handheld computer maker Palm is no less volatile, despite positive reports this morning.

The stock is up 28.13 percent since the beginning of the month, but it's more than one-third the price of its 52-week high of $165. It hit $54.94 in morning trading today, up more than 5 percent from yesterday's closing price.

The stock may have gotten a boost from three analysts who drafted favorable reports this morning, a day after the Santa Clara, Calif.-based company announced surprisingly strong earnings.

Palm reported earnings yesterday that beat Wall Street estimates by 2 cents per share, with sales that more than doubled from the same quarter last year.

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Excluding acquisition- and spinoff-related charges, Palm said it earned $23.9 million, or 4 cents per share, on revenue of $401 million for its fiscal first quarter that ended Sept. 1. In the same quarter last year, Palm earned $10 million, or 2 cents per share, on sales of $176.5 million.

Analysts had expected Palm to earn an average of 2 cents a share, according to First Call/Thomson Financial. Palm shipped about 1.5 million devices in the quarter, bringing its cumulative shipments to more than 8.7 million.

Analyst James Faucette at Pacific Crest Securities raised his rating of Palm today to "strong buy" from "buy." Analyst Thomas Sepenzis at CIBC World Markets reiterated his "buy" rating and 12-month price target of $65.

Analyst Andrew J Neff at Bear Stearns reiterated his "buy" rating with a target of $80 per share. A Bear Stearns research report noted that Palm's growing competition is likely to spur growth in the overall market for handheld computers, pocket-sized gadgets that act as electronic calendars, schedule arrangers and address books.

"We see competition from Handspring and Sony as a long-term positive in that they expand the use of the Palm platform and extend it with new applications and provide Palm with a stream of software licensing revenue with attractive margins," the report states. "Numerous positive events could be further catalysts, including faster industry growth, new products and enterprise solutions."