Palm Pre Launch and Hands-on Analysis

| June 8, 2009 | Mobile Devices | Competitive Intelligence Report

| Analyst: Avi Greengart

Current Perspective: Positive
Vendor Importance: Very High
Market Impact: Very High

Event Summary

June 6, 2009 - Sprint and its retail partners began selling the Palm Pre on Saturday, June 6, for $199 after rebate with a two year contract. No additional press release was issued. Product reviews began appearing shortly after 9 PM Wednesday night, June 3. A week prior to the launch, executives from Verizon Wireless and AT&T were quoted as having said at The Wall Street Journal’s D7 conference that they, too, would offer the Pre in six months.

Analytical Summary

• Current Perspective: Positive on Palm’s launch of the Pre at Sprint, which revives Palm as a company and brand. Unfortunately, the timing just ahead of Apple’s next iPhone launch limits Palm’s time in the press spotlight. Weak inventory levels and a relatively short – and now very public – exclusivity period mean that Sprint cannot use the Pre itself to draw subscribers from rivals. However, the Pre does give Sprint a halo product for the remainder of the year and an ideal opportunity to position itself as the value brand for data with its Simply Everything service plans. The Pre’s user interface is ridiculously polished and it excels in multitasking and personal information management. There are a few memory and battery life issues, but nothing serious. The App Catalog is largely bare, and filling it will be Palm’s big challenge – if it succeeds, Palm will be back for good. If not, Palm will be an attractive acquisition target for Dell, HP or one of the larger handset vendors.

• Vendor Importance: Very high to Palm, as the Pre is a bet-the-company product. Sales of Palm’s Treo and Centro lines have fallen dramatically, and a strong launch at its first Pre distribution partner is critical to its finances and the support of its investors. The Pre launch is similarly important for Sprint. Sprint has shored up its finances and is in no danger of going out of business, but the carrier is losing CDMA postpaid subscribers at an alarming rate and needs to do something dramatic to reverse the slide.

• Market Impact: Very high on the smartphone segment, because the Pre brings not just a new phone, but a new mobile OS (webOS), and resurrects Palm as a competitor in the market. Palm is obviously not a new market entrant, but Palm’s Palm OS 5 and Windows Mobile products threatened no one, and are not enough to keep the company solvent. Short term, the launch timing leaves Palm vulnerable to being badly upstaged by Apple, and Apple remains firmly in control of smartphone pricing models. Some customers may choose to wait for the Pre to be available at other carriers – and could be lured to other devices in the meantime – but broad distribution will help Palm in 2010. Over the long term, Palm’s challenge will be to spin out additional hardware and attract developers to the platform.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

Recommended Competitor Actions

Recommended End User / Customer Actions

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