Long-suffering Palm Inc. (PALM) shareholders had reason to be hopeful after the company hinted at a big announcement in scheduling a press conference at the Consumer Electronics Show in early January.

"Come to CES to see all that Palm New-ness you've been waiting for," said an invitation sent out Wednesday afternoon. Shares rose more than 16% on Thursday.

Wall Street is banking on the fact that Palm wouldn't schedule an event at such a high-profile trade show without something major to announce. The company's only big gun left is the debut of its highly anticipated mobile operating system, dubbed Nova.

"The speculation is that they are going to use the CES conference as the forum to introduce the new Palm (operating system) platform," said Matthew Thornton, an analyst at Avian Securities LLC. "The time and the venue makes a lot of sense for an introduction like this."

Palm spokeswoman Lynn Fox declined to provide details on the press conference, but insisted press show up for the event.

"We're very excited about CES," she said.

The unveiling of Nova will be a long-time coming for the Sunnyvale, Calif., company. Palm's old Palm operating system has grown stale with few revisions over the last several years. A full revamp of the software has been delayed over and over as the company struggled with product launches and the lack of direction.

The invitation provided a bit of a tease, Thornton said.

Its struggles allowed the company, which pioneered the smartphone segment, to fall behind rivals such as Research in Motion Ltd. (RIMM) and its Blackberrys, as well as HTC Corp. (2498.TW), which makes Microsoft Corp. (MSFT) Windows Mobile-powered smartphones and the Google Inc. (GOOG) G1. Where Chief Executive Ed Colligan once scoffed at the idea of Apple Inc. (AAPL) getting into the cellphone business, the company's iPhone is the top-selling phone in the U.S.

As a result, Palm shareholders have seen their value erode away. While up 13.6% to $1.92 on Thursday, the stock has fallen nearly 80% in the last four months.

While a new product is cause for excitement, investors should exercise caution. If Nova is unveiled, it will only represent a peak at the platform. Products aren't expected until the second quarter.

There is a lot riding on the shoulders of Nova. Last week, Palm warned that its revenue in the fiscal second quarter would be far below Wall Street's estimates. The company put forth a plan to cut costs, but many feared that its cash reserves wouldn't be sufficient to last through the year. Products using the Nova platform were seen as a crucial catalyst for growth.

"The future of the company, the other launch and the growth of the company is highly dependent on this platform," Thornton said. "If it is a failure, the viability of the company will come into question."

-By Roger Cheng, Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com

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12-11-08 1202ET
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