Palm Pre Price Cuts... Paradise Lost? (PALM, S, AAPL)

Palm Inc. (NASDAQ: PALM) is signaling something which many smartphone and PDA-phone makers do not want to signal… difficulty grabbing market share for the new Palm Pre.  The new promotion out of Sprint Nextel Corp. (NYSE: S) has the cost of new Sprint customers down roughly to $99.99.  While this $99 Palm is only for those who switch from another carrier and transfer in the phone number, does this exactly signal the greatest demand out there.

The $99.99 offer for new outside customers will last through October 31, 2009 and is for those signing a 2-year contract.  Will this move boost sales?  Perhaps.  But this has to be a signal that the market penetration is low.  We have seen several negative reports on this, and my own discussions with Palm Pre owners is not the same loving feeling you get from those using the new versions of the iPhone from Apple Inc. (NASDAQ: AAPL).

The odd notion here is that this launched in June and on the formal launch date we noted how there were not absolute sell-outs at some stores or how the launch allocations per store was very small.

Frankly, I have been a relatively satisfied Palm user for some time.  Every smart phone has its pros and its cons.  But the overall success on a relative basis is that this is not living up to its hype.  Maybe that is because the phone was an exclusive deal with Sprint.  Maybe it is on some of the functionality.  But the hype going into this has just been a very disappointing one considering that Palm rose tenfold and then some.

Maybe Palm should have never been steam rolled over and over to the point that it was almost down to $1.00.  But this meteoric rise on what may be a less-successful product launch with shares up over 2% and hovering close to $15.00 is still a rather puzzling one.

The latest NASDAQ short interest shows that the most recent short interest is 41,581,365 shares.  That data is unfortunately with an August 14 settlement date.  With this stock being such a battle ground stock, the large existing short interest is actually probably keeping the floor much higher than if new short sellers were to come piling in.

As a reminder, Palm is also on deck for earnings next week…. Its first-quarter fiscal year 2010 financial results are set for Thursday, September 17 after the closing bell.

JON C. OGG
SEPTEMBER 8, 2009