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The decision on the part of Sprint makes plenty of sense. Sprint is struggling and lacks a signature smartphone unlike its chief rivals, AT&T (NYSE:T) with the iPhone and Verizon Wireless with Research In Motion Ltd.'s (NASDAQ:RIMM) BlackBerry Storm. Even smaller competitor T-Mobile has the Google Inc. (NASDAQ:GOOG) Android-powered G1. In the last quarter, Sprint lost 1.3 million customers, according to the company's SEC filings. Some of them likely left for AT&T to purchase iPhones. Doing everything it can to snag what could be the next great phone is vital for Sprint to remain competitive and perhaps stem the ongoing loss of customers. Palm has also been hurting for awhile, leading it to sell a 27% stake for a $325 million recapitalization in late 2007 from private equity firm Elevation Partners, best known for its association with U2 singer Bono. Palm took another $100 million from Elevation in late 2008. Additionally, Elevation Partners co-founder Roger McNamee took a board seat at the company. Meanwhile, Palm hired former Apple Inc. (NASDAQ:AAPL) engineers to help reinvigorate its products. The Pre is the first of those new products (but not last), complete with a rethinking of both the hardware and software. In the meantime, Palm's bottom line worsens. In its fiscal 2009 third quarter, the company reported a loss of $94.7 million compared to a loss of $17 million in the same quarter in fiscal 2008. Earnings before interest, taxes, depreciation and amortization, or Ebitda, for the third quarter of fiscal 2009 totaled $81.9 million. Given Palm's losses, choosing Sprint makes little sense on the surface. AT&T and Verizon Wireless are the market leaders with 78.2 million and 86.6 million customers, respectively, compared to Sprint's 49 million. The rivals offer more potential customers than Sprint. However, there are two prevailing factors that made Sprint a likely pick. AT&T and Verizon already have "halo" products to draw customer interest. There is little need for AT&T and Verizon to offer a product that would compete with phones they've already agreed to sell, so they were probably unwilling to give Palm favorable contract terms. Sprint is launching the Pre with a $199 sticker price, something the other carriers likely wouldn't have chosen. Palm realizes that Sprint needs it more than it needs Sprint as evidence by product development leaks. Rumors floating through the tech blogosphere have Palm on track for releasing Pres for AT&T and Verizon in about six months -- just in time for the all-important holiday selling season. So it seems Palm is banking on the Pre as a means to stop the bleeding by spreading it to as many carriers as possible. - Matthew Wurtzel See earlier story about Sprint from Dealscape
CategoriesComments
From: Matthew Wurtzel
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Karpov, Thanks for the response. Please note that I only referred to the Pre as a possible "iPhone killer" once. In subsquent references, I instead used terms like "signature smartphone" and "halo product." In fact, there may never be an iPhone killer, but that has little to do with shortcomings of rivals Palm or Research In Motion, but instead by the simple fact that Apple's core customer follows the company almost cult like meaning they'd likely continue purchasing iPhones long after something else surpasses it. Additionally, you may have not clicked the link at the bottom to an earlier story I wrote about Sprint. It highlights a possible recovery model for Sprint in the form of its Boost Mobile brand. In other words, I'm not suggesting that Sprint is dead yet, but may finally have a formula for a recovery with a signature smartphone in the form of Pre for high-end consumers, and the cut-rate Boost Mobile brand for the low-end consumer. The danger for Sprint is the possible lose of Pre exclusivity, hence the company's immediate response this morning to Verizon Wireless' mention of a Pre and another Palm WebOS-based phone possibly coming to market in December. While this news is clearly bad for Sprint, it would clearly help Palm remain a viable business, which from the tone of your comment, you are likely hoping will be the outcome of the Pre's launch. Thanks,
Posted on:
May 29, 2009 3:15 PM
From: Hans,
Karpov's claim that it is the press and evil "media" labeling Pre as "iPhone killer" is well off the mark. This idea that it is an "iphone killer" is probably pushed daily by the public relations people for Sprint and Palm to the Press. Sprint has a problem in that the Pre is only going to be exclusive for six months.
Posted on:
May 30, 2009 5:40 PM
From: James Lumpgins,
Sprint is on fire run from the building. Palm is being purchased by Coby Electronics in two months, watch for a spike in late July.
Posted on:
June 5, 2009 5:14 PM
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Palm Inc. (NASDAQ:PALM) and Sprint Nextel Corp. (NYSE:S) are both troubled companies bleeding red ink. So why in the world have they hitched their wagons together in hopes that the Palm Pre, which launches June 6, will be the 
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The one item that crops up continually is the misperception that Sprint and Palm perceive that the Pre "will be the iPhone killer both are so desperately seeking". Outside of one arrogant remark by Roger McNamee (financier to Palm) in this regard, neither Sprint nor Palm have given any indication that they are desperately seeking to kill the iPhone - this sentiment can be blamed solely upon news media and bloggers.
Sprint needs a cutting edge smartphone to offer its customers, and Palm needs to get back in the game they once dominated. It is a competitive device to the iPhone, certainly, but I don't think either enterprise has been desperately seeking to kill the iPhone. Will it take some users from Apple and AT&T? Most certainly. Will it kill it? Definitely not. If I can see this as a consumer (with a marketing background), then surely Palm and Sprint do.
So, press people, lay off the death threats, for its you that is to blame for this sentiment.