Is It Safe? Pre Phone Might Not Save Palm

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At the height of the 2000 tech bubble, Palm(PALM Quote) looked unstoppable. Its shares topped $95 and its flagship Palm Pilots became synonymous with digital handheld organizers.

The company has since fallen on hard times. Palm has suffered through two years of quarterly losses and is quickly burning through its cash reserves. The company's debt outstrips its assets, and analysts expect quarterly losses to continue through 2010. A $425 million investment by Elevation Partners, a private equity shop that counts U2 frontman Bono among its partners, has kept the firm limping along.

Next week, Palm will launch its latest mobile phone, the Pre, a touch-screen device that will compete with Apple's(AAPL Quote) iPhone and Research in Motion's(RIMM Quote) BlackBerry line. Palm needs this product to be a hit with consumers to stay viable.

Palm's stock price has more than doubled this year in anticipation of the Pre, which some have labeled the "iPhone killer." That seems like a lofty expectation for a phone that has had little marketing support and lacks the blockbuster applications of the iPhone.

Sprint Nextel(S Quote) will sell the Pre exclusively when it hits the market on June 6. With only 48.3 million subscribers, Sprint lags behind AT&T (T Quote) and Verizon Communications(VZ Quote), which each have more than 75 million customers. Launching on Sprint's network means fewer people will be able to grab a Pre without the hassle of switching networks and breaking contracts.

The Pre has a few things working for it. Its $200 price, after a rebate and service contract, is comparable with those of iPhones and some BlackBerry models.