Palm Inc., the company that invented the smart phone but has consistently failed to compete effectively against newer market entrants, reached a point of no return when it announced plans to close all but one of its retail stores, analysts said Friday.

While consolidating operations can sometimes aid struggling companies, analysts said that is not the case for Palm, which has for some time been in a downward spiral without showing any meaningful plan to recapture market share from rivals like Blackberry maker Research in Motion Ltd.

The news follows an extensive period of troubles for the Sunnyvale, Calif., company, which explored various turnaround plans for more than a year and last June sold a 25% stake to the private equity firm Elevation Partners.

"We have long anticipated this move by Palm," UBS Investment Research analyst Maynard Um wrote in a report on Friday, in which he reiterated his "sell" recommendation on the stock.

Palm's shares had risen almost 10% to $19.57 per share following the deal with Menlo Park, Calif.-based Elevation, but that optimism proved short-lived as Palm continued to lose business and saw its cash reserves erode. Even before the store closing announcement late Thursday, Palm's stock price had already lost all of the value picked up on the Elevation news over the summer, and then some.

Palm shares, which closed Thursday at $5 before the latest news was disclosed, lost another 3.2% to $4.84 by late trade on Friday.

"There is no silver lining here," said Jeff Embersits, an analyst with Shareholder Value Management. "I have been following this company for five years and management simply can't execute."

Prior to entering the deal with Elevation, which paid $325 million for its 25% state, Palm had been the subject of speculation that it would be acquired outright. Now that it has partnered with Elevation, it has even fewer options, said Embersits, who predicted that Palm would now "run out of cash and go to zero."

"I think Evolution is asking themselves what they were smoking," he said.

It's easy, in hindsight, to question the wisdom of investing in such a troubled company. But it is also hard to comprehend how Palm could not extract value from its famous brand, which is almost synonymous with the smart phone.

It was that desire to unlock some value that kept investors engaged for so long. As part of the Elevation deal, Palm also brought in some new management and named Jon Rubenstein, the former head of Apple Inc.'s iPhone division, as its chairman.

But these turnaround efforts were too late for long-suffering Palm. In September, it made the embarrassing decision to cancel its much-hyped Foleo computing product, which had been considered one of the keys to a possible comeback.