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  1.    #1  
    Why would Palm include such a device, sure it's cool, but there is a deeper reason involving the whole marketing strategy of the Pre.

    There is no doubt Pre is a DIRECT competitor to iPhone. iPhone already has a huge established market share and infrastructure the likes of which no one has seen before. The average consumer's ultimate dream phone is the iPhone.

    In order for Pre to compete with iPhone this late into the game (3rd gen iPhone), Palm and Sprint will need to do something drastic. Like I have said before, in order to capture market share from the average consumer who isn't not tech savvy enough to see the advantages of the pre is to price the Pre lower than the magical price $199.

    At a price of $199 only the tech savvy people who have done the research and are anticipating the device will make up its market share. These are the same "techy' people that have the knowledge to see the advantages of the Pre over the iPhone; But- This is not enough consumers, the Pre will get know where.

    At a price lower than $199; $149 for example, the Pre will capture all average consumers who are considering the iPhone. It might even steal some of iPhone's current market share.

    However, at $149 subsidized, there is no way Palm is making a profit of of each unit. That doesn't matter, in competitive markets, its very normal to loose money on each unit. The company can capture profit later from software, granted if it successfully captures enough market share in the first place to develop a large database of software and 3rd party support.

    What about the Touchstone? Palm knows at $149 it is loosing about $100 per unit, however it doesn't have to be that bad. It can add an additional accessory that has large profit margins- Touchstone. The technology of this is about 2 decades old and it costs about $17 to produce. Yet if Palm sells it at $70 a pop, it can capture some of the $100 loss per unit made from the Pre. Hense all the hype, but yet not including it with the Pre.

    ... of course all this is speculation, I don't know more than any of you...
  2. #2  
    Nah, the real reason for the Touchstone is because the battery probably isn't long enough to get some of us power users through the day
  3. #3  
    palm will make money on each unit because REGAURDLESS what the price is at the Sprint store, SPRINT paid full retail price for the phones which is usually in the range of 400-600 dollars on EVERY PHONE..including all the crappy dumbphones that sprint sells. Its the way cellular business works, the manf dont lose money on the phones, its the carriers that do. That why they lock you into a 2 year contract so in the 2 years they have BEYOND made back their loss on the phone.

    any questions?
    Mike (FOOmanJEW) Jaret-Schachter
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  4.    #4  
    Quote Originally Posted by mikejaret View Post
    palm will make money on each unit because REGAURDLESS what the price is at the Sprint store, SPRINT paid full retail price for the phones which is usually in the range of 400-600 dollars on EVERY PHONE..including all the crappy dumbphones that sprint sells. Its the way cellular business works, the manf dont lose money on the phones, its the carriers that do. That why they lock you into a 2 year contract so in the 2 years they have BEYOND made back their loss on the phone.

    any questions?
    This is the infamous Apple ATT agreement. All other devices are not like this.
  5. #5  
    Quote Originally Posted by Pre_Diction View Post
    This is the infamous Apple ATT agreement. All other devices are not like this.
    unfortunately you are absolutely wrong...i worked in the cell phone industry for 6 yrs, it is EXACTLY how it works. That is why phones get cheaper as you get a longer contract. Outright prices are usually pretty close to the retail price of the phone, 1 yr contract prices are less and 2 yr prices are the cheapest. Take that to the bank sir....
    Mike (FOOmanJEW) Jaret-Schachter
    Running With Scissors
    Producer
    www.runningwithscissors.com
    www.twitter.com/mikejaret
  6.    #6  
    Quote Originally Posted by mikejaret View Post
    unfortunately you are absolutely wrong...i worked in the cell phone industry for 6 yrs, it is EXACTLY how it works. That is why phones get cheaper as you get a longer contract. Outright prices are usually pretty close to the retail price of the phone, 1 yr contract prices are less and 2 yr prices are the cheapest. Take that to the bank sir....
    Ok, maybe your are right, but then what was so special about the unprecedented Apple demands, that made ATT so furious when it subsidized the iPhone 3G?
  7. #7  
    honestly i have no idea, the only demand i KNOW of was the reason Verizon balked at the phone in the first place and that was only the official ATT and Apple stores could carry the phone. they had to alienate all their agents (3rd party companys that sell ATT phones)...and VZW said screw that...maybe ATT didnt like that either. I would also imagine, some carriers get a discount on phones if they hit a certain sales quota or ammount ordered...maybe Apple said screw that...
    Mike (FOOmanJEW) Jaret-Schachter
    Running With Scissors
    Producer
    www.runningwithscissors.com
    www.twitter.com/mikejaret
  8. dave75's Avatar
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    #8  
    Quote Originally Posted by Pre_Diction View Post
    Ok, maybe your are right, but then what was so special about the unprecedented Apple demands, that made ATT so furious when it subsidized the iPhone 3G?
    Not sure exactly what you are referring to, but Apple had a lot more control over the Iphone than any other phone manufacturer generally has. Also, I believe that Apple got a piece of the contracts that people signed with AT&T.
  9. #9  
    Quote Originally Posted by dave75 View Post
    Not sure exactly what you are referring to, but Apple had a lot more control over the Iphone than any other phone manufacturer generally has. Also, I believe that Apple got a piece of the contracts that people signed with AT&T.
    yup, that's 100% right from what I read. Generally phone manufacturers get full retail price, cell company subsidizes that price because they'll make it back within less than one month of a 2 year contract usually, and everyone is happy. Like Dave said, Apple wanted a piece of the contracts. Originally the iphone wasn't even subsidized, but now it's being subsidized like every other phone. Apple also has full control over markings on the phone. If you look at every phone sprint has ever released, there is a big sprint logo on it. The iphone is one of the only phones that doesn't have to have an AT&T logo. There may be many other promises AT&T had to make, but they kept all the specifics on the down low. We don't even know how long the AT&T exclusivity really is. It's obvious that AT&T sold their soul to Apple though.
  10. #10  
    Quote Originally Posted by Pre_Diction View Post
    Ok, maybe your are right, but then what was so special about the unprecedented Apple demands, that made ATT so furious when it subsidized the iPhone 3G?
    It is my understanding (and I am not 100% sure) that the big deal with Apple and Att was that Apple actually gets some of the monthly fees as part of the deal. Verizon wouldn't go for it. Thats why they went to ATT in the first place. (So the legend goes)
  11. #11  
    Quote Originally Posted by mikejaret View Post
    unfortunately you are absolutely wrong...i worked in the cell phone industry for 6 yrs, it is EXACTLY how it works. That is why phones get cheaper as you get a longer contract. Outright prices are usually pretty close to the retail price of the phone, 1 yr contract prices are less and 2 yr prices are the cheapest. Take that to the bank sir....
    Then can you tell me why even if you pay retail and not go on a contract, the phones you get from carriers are still locked?

    That's the part I find the most irritating, minus the 3-year contracts part.
  12. #12  
    Despite that, AT&T is making out like bandits in this deal especially with the outrageous iphone plans. Sure their pride may have taken a hit, but their network was largely considered a joke before the iphone. It's amazing how AT&T has benefited in perception.

    As for the OP, i think 149 is laughable.
  13. #13  
    Again, Sprint are the ones that are going to sell the Pre at $149 or $199 or $249. While Palm may have some say in where it is priced on contract, you can be certain that Palm will make a profit, albeit a small one, on each Pre sold to Sprint. Sprint is the company that will be selling at a loss - their goal is not to sell you a phone, it's to get you onto their plans.
    "'Form follows function' that has been misunderstood. Form and function should be one, joined in a spiritual union."
    Frank Lloyd Wright
  14. #14  
    Id say the profit on the hardware will be more then small, assuming wholesale cost to Sprint is $400-$500. Other devices like iPhone and the BB Bold have a bill of materials in the $180-220 range. Obviously Palm has a huge investment in the r&d of webOS that will be spread over each unit sold, but simply in terms of cost to manufacture Palm will be making a significant profit.
  15. Rhody's Avatar
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    #15  
    Quote Originally Posted by cardfan View Post
    Despite that, AT&T is making out like bandits in this deal especially with the outrageous iphone plans. Sure their pride may have taken a hit, but their network was largely considered a joke before the iphone. It's amazing how AT&T has benefited in perception.
    I wonder if that is really true. Remember a little while ago when Howard Stern chose a Blackberry Bold to replace his Treo? He used to be on Sprint with his Treo and now he's on AT&T. Well, he went on a rant today about how his Bold is a piece of garbage and AT&T is a horrible carrier. He said that the Bold is a great device for everything except making a phone call. He concluded that he will probably keep the Bold for messaging, browsing the Web, taking videos, etc., and then get another phone on Verizon or Sprint just for making phone calls.

    Robin Quivers followed Howard's lead and also got a Bold on AT&T. She said that she is experiencing a lot of dropped calls or failed connections. There was a consensus that AT&T is horrible and the only thing making them so popular is the iPhone. One member of the show said that he would love to have an iPhone, but would never sign up with AT&T.

    So it appears that people know that AT&T is a terrible carrier, although iPhone owners seem to be willing to look past that.
  16. #16  
    Quote Originally Posted by Pre_Diction View Post
    This is the infamous Apple ATT agreement. All other devices are not like this.
    Err, no you're wrong. ATT's agrrement had *revenue* sharing built into it. Palm doesn't get a dime of Sprint's revenue. Palm makes a device, sells it to Sprint, maybe co-market it with Sprint, Sprint subsidizes phone to end user (you/me/Dupree) with a contract for 2 years at reduced price from full retail price and so on....
    .....Life is But Such Sweet Sorrow.....
  17. #17  
    Apple had the revenue sharing deal on contracts as part of the deal on the original iPhone. When they re-upped for the iPhone 3G, they moved to the traditional model of selling units and then ATT subsidizing the price. This was caused by foreign carrier resistance to the Apple model. When they changed revenue models, they were able to increase worldwide market penetration resulting in better revenues overall.
  18. #18  
    The carriers do NOT pay full retail price. Period. For any phone. They pay wholesale price, which is a heck of a lot lower. Exactly how much lower will be negotiated between the manufacturer (Palm) and the retailer (Sprint, Best Buy, Wal-Mart, whoever). Anyone who thinks the phone company pays retail has no clue how the retail market works. If Sprint paid full retail, they'd lose money every time they sold a phone at retail, without a long term contract. The only time Palm gets full retail on a phone is if someone buys one directly from them.

    But yes, it's Srpint who will subsidize things like the $150 upgrade credit, in exchange for a two year agreement. If a rebate is offered, it's unclear who will subsidize how much of that. Palm and Sprint both have a vested interest in getting the device out to a large market, and both may be willing to take lower profits initially to raise demand.
    Bob Meyer
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  19. #19  
    Anyone else agree that @ $149, it almost seems too cheap? I hate to say it, but I'd almost rather have it be $199. Then we know we're getting a quality device, $149 device would mean cheap materials and plastic. I don't want that.
    Treo 650p --> Treo 755p --> Pre
  20. #20  
    Kind of depends on what Palm is charging Sprint, what the desired margin is and all. What Sprint can subsidize isn't exactly known either but we do know their plans are much cheaper than the competition. Then there's demand which will be very high the first 3-6 months. And finally price positioning (which quality can be perceived as), as the poster above me mentions and certainly which Palm cares about.

    I know some have said Palm has no choice in the matter. I find that hard to believe. That'd be like saying Sprint has no choice in what Palm can put on the Pre. We've seen otherwise already with Tethering.
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