New Smartphone Pushes Up Palm Shares

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Shares of Palm Inc. (PALM) rose more than 6 percent Thursday after the smartphone maker unveiled a trimmer, more affordable model designed to fight back against the onslaught of competition and attract more customers.

The Palm Centro is skinnier and lighter than its existing Treo cousins. At $99 with a two-year service contract, it is Palm's most inexpensive smartphone ever.

Sprint Nextel Corp. (S) will be the exclusive carrier when the product hits the market in mid-October, but Palm expects to expand the offering to other cellular networks after its 90-day exclusive period with Sprint ends.

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Over the past year, Palm's Treo, which pioneered the smartphone market, was considered a bulky beast as deep-pocketed rivals trotted out sleek new smartphones offered at $99, which undercut Treos and their price tags of $300 or more, depending on the model.

And though Apple Inc.'s (AAPL) iPhone is on the high-end of the market — costing up to $599 until Apple slashed the price to $399 — many analysts contend the newest smartphone rival has managed to usurp Palm's crown for user-friendly features.

Apple sold more than 1 million units within 74 days of the iPhone's launch. Palm has yet to sell that many Treos in a quarter.

Stephane Maes, Palm's vice president of smartphone product marketing, said the Centro reflects Palm's latest strategy to offer a variety of designs and prices to target different consumers — a change from its previous one-size-fits-all approach with the Treo.

"Not everybody wants the same thing and we know it has to get thinner," Maes said. "This is just the beginning."

Maes said the Centro, which weighs 4.2 ounces, will also serve as a bridge to Palm's next-generation operating system, which the Sunnyvale-based company is developing.

The Centro uses the Palm OS — a software platform that Palm officials acknowledge isn't optimized for today's multimedia demands.

Palm shares rose 97 cents to $16.40 Thursday. In the past year, the Treo maker's stock has traded between $13.41 and $19.50.

Faced with stiffening competition and rising costs, Palm's income for its full fiscal 2007 plunged by 83 percent on revenue that dipped 1 percent to $1.56 billion.

When Palm reports its fiscal first-quarter results Monday, the company said it expects to post a loss of a penny per share or break even.