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Sprint Seeks Salvation in Smartphones

Sprint is betting big on Palm's Pre phone to edge out rival T-Mobile.

Could

Palm's

(PALM)

eagerly-anticipated

Pre phone

breathe new life into

Sprint

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?

The

telecom giant

will be the first wireless carrier to offer the smartphone when it debuts during the summer, a move which it hopes will rejuvenate its

flagging business

. The No. 3 wireless player has seen

millions of customers

jump ship in the past four years after an ill-fated merger with

Nextel

and is looking for a big smartphone boost.

Sprint, which lost 4.5 million subscribers and swung to a

$2.8 billion loss

last year, is facing stiff competition from

rivals

AT&T

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and

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Verizon

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, hence the significance of the Palm Pre announcement.

Sprint's biggest challenge is attracting subscribers to its network, so offering the Pre is a smart move. Touted as a possible challenger to

Apple's

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iPhone and

Research In Motion's

(RIMM)

BlackBerry Storm, the Pre features a touchscreen and Palm's new

WebOS

operating system.

A recent report by

Deutsche Bank

analyst Jonathan Goldberg suggested that Sprint may even ship the Palm Pre earlier than June 30.

The phone also makes an appearance in Sprint's latest TV ad, part of an ongoing advertising blitz.

"Sprint is aggressively investing in rebuilding its brand," wrote Craig Moffett, an analyst at Sanford Bernstein, in a recent note, explaining that the firm significantly increased its spending on network TV advertising during the fourth quarter.

Clearly Sprint has high hopes for the Pre phone, which has helped drive the company's stock during the last few months. Since the end of last year, the firm's shares have risen more than 100%, and the stock closed at $4.41 Monday.

During the company's fourth-quarter earnings call, Sprint CEO Dan Hesse said that the Pre had already received "resounding praise" from a number of third party-evaluations. "We are bullish about the potential of this outstanding device for both business and consumer applications," he said.

Despite all its marketing hype, however, there are other

big challenges

for Sprint outside of smartphones, notably its iDEN network, which provides walkie-talkie services. The company has already announced plans to "retain and rejuvenate" the iDEN network, and has also been working to improve the performance of its Nextel Direct Connect push-to-talk business.

Add to that fierce competition from Verizon and AT&T, and Sprint has its work cut out.

The company can at least use the Palm Pre's touchscreen to lure new customers. Touchscreens and QWERTY keyboards are taking over from numeric cellphone keypads, reflecting the

growing popularity

of text messaging and wireless Internet use. Research by industry organization CTIA Wireless found that U.S. subscribers sent 1 trillion text messages in 2008, triple the volume sent in 2007.