June 3, 2009
Palm's Pre: A Star Is Born?
Filed at 9:59 p.m. ET

NEW YORK (Reuters) - It's no iPhone-killer, but the launch this weekend of Palm Inc's "Pre" could well become the brightest event this year for a gloomy industry.

Palm Inc's smartphone may not attract lines around the block like past Apple Inc iPhone launches. But its launch will be seen as a badly needed shot of adrenaline for Palm and exclusive provider Sprint Nextel Corp.

Plenty could go wrong. Executives have warned of shortages. Scathing reviews could smother not just Palm's hopes, but also Sprint's. And investors might have to wait a long time for the device to boost Palm's financials.

But the hope is Pre -- with touchscreen control, a slide- out keyboard and an operating system designed for trendy Web services such as social networks -- wows consumers enough to stem Palm's loss of market share and customer defections at Sprint.

Since the Pre made its debut at the Consumer Electronics show in January, excitement over the device has intensified. Even arch rivals Verizon Wireless and AT&T Inc both say they want to sell it after Sprint's exclusivity runs out at the year's end.

If it takes off, Palm may even be an acquisition target.

"If you're buying (Palm shares) now, definitely what you're looking at is that they're going to have the most valuable asset in the industry. At some point, somebody will want to pay a premium for that," Pacific Crest's James Faucette said. "From a products perspective, the impact on the market is probably as important as iPhone."

Sprint and Palm are David to Apple and AT&T's Goliath,

with some casting Pre as the first credible iPhone rival.

Some analysts had fretted about the timing of Pre's June 6 launch, days before Apple is expected to unveil a new iPhone. But several now see Apple announcing an iPhone that is not radically different from previous models.

About 623,000 Pres are expected to move in Palm's fiscal first quarter ending August, five analysts polled by Reuters said. Estimates ranged from 500,000 to 865,000 phones.

That would be a fraction of Apple's launch-quarter sales of 6.89 million for the iPhone that started selling around the world last July. But it's still an ambitious estimate for one phone at Palm, which had third-quarter phone sales of 482,000.

"My sense is that there will good pent-up demand," said Avian Securities analyst Matthew Thornton. "(Palm) is a company that's really gearing up for a complete product refresh."


There could be complications. Top Sprint and Palm executives warned last week they may not meet initial demand.

That sparked some concern about manufacturing problems or difficulties getting display parts amid the current craze for touchscreens across the smartphone market.

"Palm doesn't have a lot of negotiating power" if supply is tight, said Global Crown Research analyst Tero Kuittinen.

Device shortages may pique desire for the device, but analysts worry Palm could miss out on sales if it is unable to ramp up supply quickly in the months following the launch.

"For a lot of these models, demand can fade quickly and people move on to the next big thing," Kuittinen said. "It's always dangerous to launch with a thin volume because you really run the risk of leaving money on the table."

Palm shares rose 9 percent last Thursday after the surprise news that U.S. wireless service leader Verizon Wireless, a venture of Verizon Communications Inc and Vodafone Group Plc, plans to carry Pre. That came a day after No. 2 U.S. mobile service AT&T said it wanted the device.

"I look at this as Verizon and AT&T trying to kick sand in Sprint's face," said Macquarie Research analyst Phil Cusick.

The eventual consumer response will depend heavily on the tone of newspaper reviews, according to Cusick.

A lot also rides on Palm's new webOS operating system. Faucette sees webOS trumping iPhone in multi-tasking -- the use several applications at the same time.

"What'll be important when we see the reviews is not only what the device looks like, but how it works on the Sprint network," Cusick said, because a bad review could be a setback.

While reviewers raved about the iPhone, they were critical of AT&T's network. The stakes are even higher for Sprint, whose Chief Executive, Dan Hesse, has been working over the past year to dispel a lingering reputation for poor network quality.

Even if Pre is well received, investors should not see Pre as a catapult back to profits for Palm, which is expected to double its quarterly loss to $93.08 million for its fiscal first quarter ended May, according Reuters Estimates.

"Profits are still quite a way away," Cusick said. "If they can make the handset and the operating system a big success, people will feel good" about an improvement in operating margins.

Analysts expect most of the first Pre customers to be existing, loyal Sprint customers rather than consumers moving from rival services, especially now that Verizon Wireless said it hopes to have the phone in about six months.

"A six-month wait is something most people will be able to tolerate. Only the absolute gadget freak will have to have it immediately," Global Crown's Kuittinen added.

(Reporting by Sinead Carew; Editing by Edwin Chan and Andre Grenon)

June 3, 2009
Palm's Pre Shines In Ways, Not In Others
Filed at 9:48 p.m. ET

NEW YORK (Reuters) - The long-awaited Pre has nice new touches, but Palm Inc has a lot of work to do if the device is to be a serious competitor to the iPhone.

The device seemed to live up to some expectations but fall short on others for this reporter, who played around with the Pre for just a few days.

The interface does feel new and interesting with some lovely bells and whistles. But features like photo-viewing and surfing are sometimes painfully slow and social networking integration does not go as far as this correspondent hoped.


So what's Pre like? It's shaped like a soap bar with a smooth touchscreen display that has a discrete round button protruding from the lower part that minimizes applications. It has an unobtrusive on/off button at the top edge, plus a volume button on the left edge.

Gently push the bottom edge of Pre to reveal a tiny QWERTY keypad that tilts slightly to you. The keyboard is very compact, and people with relatively big fingers may find it too small.

This may upset anybody who hoped the physical keyboard would be an improvement on the iPhone's virtual one.


Perhaps Pre's biggest novelty is how it handles messaging. From within one application, you can exchange texts with phone contacts and swap instant messages with buddies who use either AOL instant messenger or Google Talk.

Accessing multiple messaging systems from a single platform is great because different users like different services.

Another treat is alerts containing the first line of new, incoming messages, which appear at the bottom of the screen whatever you might be doing: messaging, Web-surfing or gaming.

This may be a welcome change from, say, checking your message when BlackBerry's flashing red-light alert appears.

But, for email, Pre does not seem to provide the alerts. It was easy to set up Gmail but to get new email, you tap on the inbox tab and wait several seconds to view it, whether the email was short or included heavy attachments.

This may deter those looking for a BlackBerry alternative. But they may be happy to hear that once an email is open, it is very easy to download a word document or a PDF. To magnify the text, spread two pinched fingers apart on the screen.


Unlike today's iPhones, Pre supports copy-and-paste. But the controls are harder to use than on a BlackBerry, which simply employs a scroll ball to select text.

On Pre, drag your finger over the text to be selected while holding down a keyboard button. Once text is selected, go to a menu and then a submenu at the top of the screen to tap on cut, copy or paste. On BlackBerry you press one button and scroll through one menu to choose.


One exciting promise from Palm was Pre's integration with social networking services such as Facebook. But it appears limited at least initially.

A user can easily add Facebook friends as Pre contacts. You can text, call or email contacts if they include these contact details in Facebook. Many do not.

Pre-Facebook contacts will at least have Facebook photos of friends, and the option of adding their phone numbers manually. The photo shows up on the screen if they call.

But here's the rub. Pre does not support writing to Facebook friends right from your contacts. Palm suggests writing to your Facebook friends via Pre's Web browser, but its just not as easy as the other messaging application.


Pre has a 3-megapixel camera you can use to take photos in horizontal or landscape mode. This reporter had to reboot Pre to make both options work but then took some nice photos.

However, the big upset here was the photo display. Pre is designed to let you scroll through your photos by dragging your finger across the screen. In practice it seemed to take as long as 10 seconds for each photo to become clear and unpixelated. Then can you move to the next one. Definitely no iPhone.


Pre is strong in multi-tasking, the ability to have different applications open at the same time. On iPhone, you have to close and open applications to switch.

Pre has a fun way of displaying multi-tasking. Apps look like a series of cards that sit side by side on the screen. To switch, drag a finger over each and tap on the one you need. When done, you close an app by flicking your finger up the screen to "throw" it closed. This is good fun.

There is a limit however on how many apps you can have open at once. Depending on what you're using, the limit seems to vary from 8 to 12. Video service YouTube seems to tax the phone more than other apps. When this correspondent had 8 apps open, including YouTube, an alert popped up warning it was too many.


We did no scientific measures to check Pre's battery life but there were some worrying signs. After a night charging and a morning's data use it begged for a recharge at 1 p.m.

An email from Palm explained that turning off instant messaging would help preserve power. Sound advice, but tough to hear that the coolest feature would drain the battery.

Data speeds on Sprint's network were variable. YouTube videos worked well sometimes but often came with several interruptions. At times it took too long to get on websites as commonly used as yahoo.com. Sometimes they worked very well.

Palm's suggests using Wi-Fi -- a fast short-range web link -- whenever possible. This worked well but Wi-Fi is not always available when you're on the go.

Pre is an attractive alternative but it remains to be seen if consumers have enough patience for its quirks.

(Editing by Steve Orlofsky)