Tech Rumor of the Day: Palm - TheStreet

Updated from 1:06 p.m. EDT

Palm

(PALM)

is apparently preparing Pixie, a lower-priced follow-up to its popular Pre phone.

The new phone is expected to be a candybar-shaped touchscreen device that would sell for $99, and it's aimed directly at the cheaper

Apple

(AAPL) - Get Report

iPhone. Palm is working with its contract manufacturing partner

Compal

to have the phone available for sale in the U.S. before the end of the year to take advantage of the holiday buying season, says Collins Stewart analyst Ashok Kumar.

The Pixie would give Palm a second key product and add momentum to the fallen smartphone pioneer's remarkable rebirth.

This week, in particular, has been quite a coming out party for Palm.

Starting Saturday, short supplies of Palm's hotly anticipated Pre phone gave the company and telco partner

Sprint

(S) - Get Report

an immediate

sellout success

. An estimated 50,000 devices sold during the debut weekend.

On Wednesday, Palm made its leadership transition official by

replacing

longtime CEO Ed Colligan with Palm chairman and former Apple tech guru Jon Rubenstein.

Now, if the Pixie arrives before Christmas, Palm would not only have another device in the market, it may also have another telco partner to sell it through. Kumar says he suspects the Pixie is being built for WCDMA networks, which would align it more with the

AT&T

(T) - Get Report

tech camp and not with the

Verizon

(VZ) - Get Report

or Sprint group.

The Pixie phone is expected to run on Palm's new Web OS operating system. There has also been speculation that another Palm Web OS device -- dubbed EOS, is headed to AT&T later this year.

In a note to clients Thursday, Kumar highlighted some of the suppliers that would stand to be beneficiaries of a Palm Pixie phone. He says

Qualcomm

(QCOM) - Get Report

would likely get the wireless modem business and

Texas Instruments

(TXN) - Get Report

is in line for the graphics and applications processor supply spot.

Palm declined to comment for this story.

The stock was up $1.44, or 12%, to $13.43 in recent trading.