Palm Pre and Nokia N97: A Second Look
Sprint ( S) has sold a healthy 350,000 Palm ( PALM) Pre phones in the seven weeks since its debut. The update comes from RBC analyst Mike Abramsky whose research team has been monitoring traffic at some two dozen Sprint stores. Not only does Abramsky find "sustained momentum" in Palm Pre sales, but also the return rate has been low, running between 2% and 3%, he noted in a research report Friday. If true, this would put the Pre in the ranks of Research In Motion's ( RIMM) hot Tour phone debut at Verizon ( VZ), and help calm concerns that Pre sales had dropped off. It could also revive hopes that Palm's up-from-the-ashes recovery hasn't fizzled yet. Palm's Pre and particularly the new WebOS mobile phone software system aren't only the key to Palm's turnaround, but it is also sweet takeover bait.
As more touchscreen phones hit the market, a new generation of Web-friendly, swipe-and-poke software systems threaten to displace the old scroll-and-click operating method. Palm's WebOS along with Apple's ( AAPL) iPhone and Google's ( GOOG) Android system represent the vanguard of these new operating systems. The success of Palm's WebOS increases the chance that a larger player -- think Nokia ( NOK), Hewlett-Packard ( HPQ), Motorola ( MOT) -- could buy Palm as a quick entrée to the fast-growing smartphone market. There had been some reports that the Pre cooled quickly after its debut. In fact, after the initial June 6 launch, news about Palm's Pre phone was predictably scant as Apple's newest iPhone and $99 predecessor dominated the headlines.
And even initial reports of Pre sellouts were tempered by indications that slim supplies rather than fat demand were controlling the flow. Worries about the Pre's appeal increased when Apple blocked Pre phones from its iTunes site. The move threatened to leave Palm pacing outside of the popular online media mall, while iPhone users shopped with abandon. But Palm countered Thursday with a fix to get around Apple's block.
By the end of June, Palm shares had surged more than 400% for the year on the strength of the Pre's arrival and the takeover prospects for the company. But those shares have now dipped 15% this month as questions filled the Pre news vacuum. So if Abramsky's right, the Palm machine is still humming.