NEW YORK – Sprint Nextel Corp (S.N) said it will sell Palm Inc's (PALM.O) long-awaited Pre smartphone starting on June 6 for $199.99 with a two-year service agreement, in line with Apple Inc's (AAPL.O) iPhone price.
Shares in Palm fell 5 percent as some investors were disappointed that the price would match rather than beat iPhone's price and Sprint's chief executive said on Tuesday he expects Pre shortages around the launch.
Piper Jaffray analyst Michael Walkley said it was typical that a new high-profile phone would be in short supply around the launch time. But he some Palm investors were likely taking profits after shares rallied from $3.30 in January to more than $12 in anticipation of the phone.
"Maybe there's a little disappointment about the launch price and the fact they're indicating that they'll have limited supply," said Walkley.
Sprint's Chief Executive Dan Hesse said at an investor conference that the company was expecting to have trouble meeting initial demand for the device.
"We don't intend to advertise it heavily early on because we think we are going to have shortages for a while," Hesse said according to a Thomson Reuters transcript. "We won't be able to keep up with demand for the device in the early period of time."
Pre is expected to help Sprint, the exclusive U.S. provider until at least the end of the year, stem customer losses and is seen as Palm's best hope to regain smartphone market share from iPhone and Research In Motion's (RIM.TO) (RIMM.O) BlackBerry.
However some analysts worry that the Pre could be upstaged by a new cheaper version of iPhone, which is expected to be announced by Apple as early as June 8. The iPhone sold by Sprint's bigger rival AT&T Inc (T.N).
CL King Associates analyst Lawrence Harris said that some investors may be disappointed it will not be available sooner.
"It would've been nicer if the device was out in the market for a longer period before any potential iPhone," Harris said.
While Pre may stop existing customers of Sprint and Palm from switching to rival phones and service, it would be unlikely to lure away users of iPhone or BlackBerry, he said.
"Its going to sell principally into the base, to existing Palm owners and existing Sprint subscribers," Harris said, without giving a specific sales target.
The Pre has touch screen controls as well as a keyboard that slides out from under the phone. It will run on Sprint's 3G network and feature personal and professional calendars, e-mail, and contact lists, the company said.
Sprint shares were up 10 cents at $5.42 in morning trade on NYSE. Palm shares were down 6 percent on Nasdaq at $11.36 after falling as much as 8 percent earlier in the session.
Palm shares have risen from a low of $3.30 before it announced Pre at the January Consumer Electronics Show, where it was the most talked about device at the show.