By: Michelle Maisto 2009-05-02 eweek
Just as Palm Pre hype has reached a deafening roar, out comes news of a second new Palm mobile and wireless device, code-named Pixie, as well as analyst feedback that Palm is facing hardware and software issues with the Pre and that Sprint doesn't inspire users to switch carriers.
Palm is reportedly working on a follow-up to its soon-to-be released Pre smartphone called the "Pixie," which some suggest is a smaller version of the new handset that could further challenge the Apple iPhone.
The Washington Post is one of several publications that are reporting that the Palm Pixie will be a candy bar-style phone, geared toward the lower end of the market, with a $99 price point.
The Pixie will use the same WebOS operating system as the Pre and have a fixed keyboard. It will reportedly be released a few months after the Pre—which is expected to arrive in June, if not sooner.
It's unclear whether the Pixie is a definite go or dependant on Pre sales, according to the Post.
At the same time that Palm is said to be experimenting with different versions of its new smartphone, some are beginning to ask whether the Palm Pre will meet the high expectations set for it by analysts, developers and backers.
In an April 30 research note, Ashok Kumar, an analyst with Collins Stewart, wrote that Palm is experiencing some problems with the Pre that could put a damper on the enthusiastic response that the smartphone has received so far.
"Supply chain checks indicate that due to multiple hardware and software issues, Palm has dramatically reduced its production orders for Pre with its ODM partner," Kumar wrote in the research note. "The Street currently has modeled over 1 million smartphone unit shipments for Palm in [second half of 2009]. We believe this is highly unrealistic." Bloomberg has reported that, alternately, Palm may stockpile devices, wanting to heighten the sense of demand.
In the note Kumar also questioned the promise of the Sprint network. "Sprint is the only major carrier that has signed on to sponsor the Pre platform," he wrote. "Sprint, which has only a third of the subscriber base of either AT&T or Verizon, has been losing customers due to structural problems."
Tina Teng, an analyst with iSuppli, predicted that Sprint will offer the Pre for a subsidized price of about $200 (reportedly the Palm Pre costs $170 to produce), and Kumar wrote that this price point is essential.
"In our opinion, it is highly unlikely customers of AT&T or Verizon will switch to Sprint," Kumar wrote. "Across the pond, carriers are taking a wait-and-see attitude given the high platform cost and lack of conviction on sell-through. If Sprint does not match or beat AT&T's subsidized iPhone price of $199, which translates to a subsidy in excess of $200, the Pre is DOA."