The coming Palm Pixi (Palm photo)
Although smartphone maker Palm wowed many tech journalists when it introduced the Pre at the Consumer Electronics Show last January, it doesn’t seem to have wowed consumers to the same extent now.
In its last quarterly earnings report, Palm stated it sold 823,000 handsets in the three-month period ended August 28, which includes the launch of the Pre in June. While stronger than industry experts forecast, Palm didn’t break down how many of those units were of the Pre model. It still sells the Treo Pro, for instance.
While 823,000 units is nothing to dismiss, more recent news is particularly troubling. Sprint-Nextel, so far the exclusive carrier for the Pre in the U.S., reduced the price of the Pre to $149.99, with a two-year service contract, from the initial $199.99 at launch time. Worse – for Palm, not consumers -- Rick Aristotle Munarriz reported Monday on The Motley Fool that Amazon.com has been selling the Pre for $99 and Wal-Mart knocked it down to $79, presumably in each case with a contract.
The pricing activity begs two questions: One, does price cutting undermine the value of the Pre -- its cachet, if you will – if it’s being discounted so soon after launch; and two, how is Palm going to price the soon-to-be released Palm Pixi at a lower price point than Pre?
Spokespeople for both Palm and Sprint-Nextel told me Monday that information on pricing or availability for Pixi is not yet available. As to pricing existing models, Palm's Alex Hunter stated, "Our retail partners set the price of the Pre at their respective locations."
The Pixi is already being promoted on Palm’s Web site and described in several news reports as a more value-priced alternative to Pre. Just from pictures online, the Pixi mimics the look of the Pre but is missing the slide out QWERTY keyboard. Pixi’s keyboard shares space with the LCD screen on the front of the device.
So how can Palm position Pixi at a lower price point than the Pre – and protect its margin -- when the Pre is falling in that direction all by itself?
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