The new Palm Pre smartphone, announced today, isn’t just a crucial bet for Palm (PALM). It’s an important product for Sprint Nextel (S), the no. 3 U.S. wireless carrier, which will be the first to sell it.
Both companies have lost significant market share and money over the last few years and customers have fled to better options like Apple’s (AAPL) iPhone on AT&T (T).
So how can the Pre boost Palm and Sprint?
- It needs to ship soon, while competitors like Microsoft (MSFT) and Research In Motion (RIMM) still fumble with consumer-focused devices and ugly user interfaces. And before Apple unloads the next edition of the iPhone. FCC approval will slow things down. But Palm needs to hurry.
- It needs to be cheap. At most, $199, which Apple charges for the iPhone. But we think the iPhone will be $99 sooner than later, so Sprint and Palm will eventually have to be comfortable with that price for the Pre, too.
We realise Palm needs to start making a profit. But this is a recession. And Palm CEO Ed Colligan is kidding himself if he thinks the Pre is worth more money than the iPhone, which he seems to have suggested to Peter Kafka this afternoon.
Just as important: If Palm and Sprint are going to aim at the huge swath of Americans who don’t yet own smartphones, they need to think about pricing phone service cheaper than their rivals. There are many people who will not spend $100 a month on iPhone service no matter how sexy the phone is.
If Sprint can offer something closer to the $60 a month that average consumers spend on mobile phone service, it could sell a lot of Pres. If it’s not aggressive and still tries to get people to spend $80-100 per month on service, it will have a tougher time.
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