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  1.    #1  
    February 26, 2010
    Pixi Discounts Seen Hurting Palm Profits
    By REUTERS
    Filed at 1:45 p.m. ET

    NEW YORK (Reuters) - Sprint Nextel Corp <S.N> started offering a 50 percent discount on Palm Inc's <PALM.O> Pixi phone on the same day the handset maker cut its revenue target, raising profitability concerns.

    Palm shares fell 4 percent on Friday, following a 19 percent drop on Thursday when the company issued its warning for current-quarter and full-year revenue [ID:nN25246210].

    Sprint, Palm's closest U.S. service provider partner, began to sell the Pixi for $49.99 on Thursday.

    That is not even the lowest price for the Pixi. Wal-Mart <WMT.N> is giving the phone away on its Website to customers who sign a contract with service providers the retailer has agreements with.

    Sprint's bigger rival, Verizon Wireless, already offers a 20 percent discount on its version of the Pixi just a month after it started selling the device. Verizon also offers a second Pixi free to families who sign up for two contracts.

    It is unusual for mobile operators to discount phones so soon after launch.

    "Inevitably this will hurt Palm's profits," said CL King analyst Lawrence Harris. "If it's not in the February quarter, it'll be in May."

    Pixi, Palm's second phone based on its webOS software, first went on sale at Sprint November 15. It also sells Pre, whose sales disappointed after an enthusiastic industry response when it was first unveiled in January 2009.

    BMO Capital Markets analyst Tim Long questioned Palm's prospects in the coming months as carriers already appear to be having trouble getting rid of Palm inventory.

    "We think Palm now has sizable channel inventory issues at Sprint and Verizon, which will make for an even tougher fiscal fourth quarter as their lineup ages," said Long said in a research note. The fiscal fourth quarter starts in March.

    Palm partly blamed poor marketing of its phones at Verizon Wireless, a venture of Verizon Communications Inc <VZ.N> and Vodafone Group Plc <VOD.L>, for its lowered outlook.

    "Dave Whalen and I just returned from a very successful meeting with Verizon Wireless, where they acknowledged that their execution of our launch was below expectations and recommitted to working with us to improve sales," said Chief Executive Jon Rubinstein in a memo to employees. Whalen is Palm's senior vice president for global sales.

    He also said that 200 "Palm Brand Ambassadors," including Palm employees are now working on training Verizon sales representatives and that these efforts were beginning to show an improvement in sales week over week.

    Analysts say that this might not be enough. They said Palm needs to offer new phones with bigger screens and keyboards than the Pre and Pixi.

    Multiple sell-side analysts downgraded their estimates for Palm after the warning. Canaccord Adams analyst Peter Misek bet that the shares could fall even further as he cut his price target for the shares to $4 from $8.50.

    UBS analyst Maynard Um also cut his price target for the stock to $4.50 from $10 and downgraded the shares to a sell rating from Neutral

    Palm shares were down 26 cents at $6.27 on Nasdaq. The stock had already lost half its value since mid January on investor impatience for a new device.
    Please Support Research into Fibromyalgia, Chronic Pain and Spinal Injuries. If You Suffer from These, Consider Joining or Better Yet Forming a Support Group. No One Should Suffer from the Burden of Chronic Pain, Jay M. S. Founder, Leesburg Fibromyalgia/Resources Group
  2. #2  
    The only part of this that I find even vaguely interesting is this:

    He also said that 200 "Palm Brand Ambassadors," including Palm employees are now working on training Verizon sales representatives and that these efforts were beginning to show an improvement in sales week over week.
    Otherwise: saying that reducing prices could hurt profitability? Wow, what brilliant analysis that is.
    Treo 600 > Treo 650 > HTC Mogul (*****!) > HTC Touch Pro (***** squared!) > PRE! > Epic
  3. ray1b's Avatar
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    #3  
    I thought the Sprint & Verizon eat the cost when they lower the price of the phones.
  4. bruba's Avatar
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    #4  
    Quote Originally Posted by ray1b View Post
    I thought the Sprint & Verizon eat the cost when they lower the price of the phones.
    Yeah, for all we know the price the carrier pays is super low and that's why they're selling it at this price. First they were making $100 on a phone and now $50. That wouldn't make Palm's profit any less..
  5. #5  
    Perhaps they're assuming that price reductions by the carriers now will put downward pressure on Palm's pricing going forward.
    Treo 600 > Treo 650 > HTC Mogul (*****!) > HTC Touch Pro (***** squared!) > PRE! > Epic
  6.    #6  
    Quote Originally Posted by wynand32 View Post
    The only part of this that I find even vaguely interesting is this:



    Otherwise: saying that reducing prices could hurt profitability? Wow, what brilliant analysis that is.
    I am surprised they did nto do this before this. However, when my contract is up with V, I will get a Pre or c40 from sprint in th efall. I have had 4 palms including the one I have now and I have alwasy had good luck with them!
    Please Support Research into Fibromyalgia, Chronic Pain and Spinal Injuries. If You Suffer from These, Consider Joining or Better Yet Forming a Support Group. No One Should Suffer from the Burden of Chronic Pain, Jay M. S. Founder, Leesburg Fibromyalgia/Resources Group
  7.    #7  
    Quote:
    Originally Posted by wynand32
    The only part of this that I find even vaguely interesting is this:

    (THIS PART DID NOT POST PROPERLY IN LAST POSTING):
    Quote:
    He also said that 200 "Palm Brand Ambassadors," including Palm employees are now working on training Verizon sales representatives and that these efforts were beginning to show an improvement in sales week over week.


    Otherwise: saying that reducing prices could hurt profitability? Wow, what brilliant analysis that is.

    I am surprised they did not do this before this. However, when my contract is up with V, (in Oct), I will get a Pre or c40 from sprint in the fall. I have had 4 palms including the one I have now, (treo 300, treo 600, treo 650 & now I have a centro), and I have always had good luck with them!
    Please Support Research into Fibromyalgia, Chronic Pain and Spinal Injuries. If You Suffer from These, Consider Joining or Better Yet Forming a Support Group. No One Should Suffer from the Burden of Chronic Pain, Jay M. S. Founder, Leesburg Fibromyalgia/Resources Group

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