Palm Pre Debut Risks Running Up Against Latest iPhone Launch

Sprint Needs Promising Smartphone to Take the Spotlight

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SAN FRANCISCO ( -- When the Palm Pre smartphone launches sometime in mid-May, the current unofficial estimate, it will face a number of marketing challenges. And every week that passes without launch, timing becomes a bigger one.

The Pre will come out positioned as the first real iPhone challenger, including support for multitasking functions the iPhone lacks.
The Pre will come out positioned as the first real iPhone challenger, including support for multitasking functions the iPhone lacks.
Many Palm watchers expected the phone, unveiled in January, to launch last week. And while it has benefited from massive amounts of buzz, every delay puts the Pre closer to the expected midsummer launch of the latest version of Apple's iPhone, offered exclusively by AT&T.

The Pre is pegged as a hoped-for hit that will breathe new life into not just Palm, which has been steadily losing market share in the smartphone space, but also its struggling carrier partner, Sprint, which shed 1.3 million customers last quarter and lacks a marquee handset.

"Sprint is in desperate need of a hit. It's more important to Sprint than Palm that the Pre comes out quickly," said telecom-marketing consultant Mitch Gooze.

Brad Akyuz, an analyst with Current Analysis, said, "They have to do whatever it takes to ship in early May so it can take the spotlight."

First real iPhone challenger
The Pre will come out positioned as the first real iPhone challenger, thanks to word-of-mouth extolling its slick operating system, including support for multitasking functions the iPhone lacks. And while Palm has a history of courting corporate users, the Pre is expected to sit somewhere between the enterprise workhorse BlackBerry and the multimedia-rich iPhone. The Pre will launch with consumer-friendly applications such as Pandora Radio as well as features for business users, including one that lets them pool all of their contacts from various sources into a single repository.

To compete with other smartphones, Pre's price tag is expected to range between $179 and $200 with a two-year contract. Palm has hired Modernista to execute the Pre campaign; Sprint's agency of record is Goodby, Silverstein and Partners.

Mr. Akyuz said the launch message should focus on the phone's innovations. "I don't expect to see a similar 'Pre vs. the iPhone' campaign as when Sprint launched the Samsung Instinct. Palm should be the one setting the benchmark here and have others try to compete," he said.

Still strong interest
The latest data suggest Palm can still capitalize on buzz. The hype has leveled off since January, but interest in the device has stayed constant in the past two months, as unique visitors to Palm and Sprint's Pre pages have hovered around the 100,000 mark, according to analytics firm Compete.

Users can sign up to get updates on the Sprint and Palm websites, and Sprint has floated pictures of the Pre in the new campaign touting its 3G network without referencing it directly. The companies declined to discuss the handset's launch, other than say it would happen in the first half of the year.

One concern is launching the Pre with hiccups, something that plagued both the iPhone and, more recently, Research in Motion's first touch-screen smartphone, the BlackBerry Storm. RIM rushed to get the Storm out for the holidays and was criticized for shipping it before getting rid of the bugs. Still, it sold a respectable 1 million units within 10 weeks.

Despite the positive early reception, both Sprint and Palm will have major obstacles to overcome.

Survey results released by ChangeWave last week suggest that the Pre will have to deal with Sprint's image problem as a second-tier carrier with poor customer service. In a survey of 4,292 cellphone owners, 17% said Sprint is the top reason they will not consider the Pre. Incidentally, the same percentage said they won't buy an iPhone because of AT&T. But Sprint is no AT&T. It's struggling to keep its 49 million customers, while its bigger rival is growing its 77 million subscriber base.

Limited marketing budget
Palm won't have the benefit of Apple's loyal base or BlackBerry's legions of addicts, and it certainly can't match the war chests of its bigger rivals.

Although Sprint will share in the marketing duties, Palm is expected to drive Pre's messaging. The unprofitable company, which received an $84 million capital injection last month, it will have to make its marketing dollars stretch much further than its competitors. Verizon Wireless spent $100 million to roll out the Blackberry Storm, and just the media buy for Apple's first iPhone launch likely came to at least $150 million, according to one ad executive.

The Pre will be helped by healthy appetite for smartphones, a category expected to grow upward of 10%, despite a widely predicted down year for overall mobile-handset sales. In ChangeWave's survey, 11.2% of respondents said they'll be buying a smartphone in the next 90 days. And for the first time in more than two years, Palm is registering greater consumer interest: Those who said they would buy a Palm smartphone rose three percentage points.

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