Palm Pre To Be Followed By Pixie – If All Goes Well

Mobility

Mini-me follow up will depend on Pre succeeding – and analysts are starting to have their doubts

With excitement about Palm’s Pre mounting, news slipped out that the company is working on a smaller follow-up without a sliding keyboard, called the Pixie. 

The Pixie will be a smaller version of the Pre, but without the sliding keyboard, according to the Washington Post and other journals. At the same time, analysts suggested that Palm is facing hardware and software issues with the Pre.

According to the Post, the Pixie will be a candy bar-style phone, geared toward the lower end of the market, with a $99 price point. It 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 plan or one that depends on Pre sales, but Palm is hoping Pre will contend against the iPhone, with strong features including a wireless charger, and decent camera.

But while Palm is said to be experimenting with different versions of its new smartphone, some are questioning whether the Pre can actually meet the high expectations set for it by analysts, developers and backers.

In a 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 subsidised 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.”

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