Wednesday, August 12, 2009

Palm's Pre Is Trying to Live Up to the Hype

Palm's road to a comeback is hitting a few speed bumps.

When Palm (PALM) launched its Pre smartphone on June 6, expectations were high that the long-troubled company could have a hit with the device, the biggest launch by the new management team led by a former Apple (AAPL) executive. Now analysts estimate that Palm likely will sell just 300,000 to 500,000 Pres in their first three months on the market. That's not bad, but it's short of the outsize expectations ramped up by the phone's advanced technology and splashy debut.

The modest sales performance for the Pre, which sells for $199 with a two-year contract from Sprint Nextel (S), is raising questions about Palm's ability to land other wireless carriers to offer the phone, and how large the carriers' subsidy payments and marketing support for the Pre might be. "Some carriers will be looking through less rose-tinted spectacles than before, [and] expectations will be pushed back" for the Pre, says Neil Mawston, a director with tech consulting company Strategy Analytics. "If Sprint can't prove that the Pre is an iPhone killer, it'll really affect the level of subsidies" carriers pay to make the Pre cheaper in stores.

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