Palm's Pre Wants to Be a $99 Smartphone

Palm's (Nasdaq: PALM  ) Pre had another close call with its errant $99 retail price yesterday.

In its bumbling wisdom, Sprint-Nextel (NYSE: S  ) made an offer to non-Sprint customers. Until this morning, it's been selling Palm's Pre for $199 with a two-year contract after a $100 mail-in rebate. For a few hours yesterday, Sprint was offering $100 in service credit to qualifying wireless customers of rival carriers looking to port over their existing numbers to a new Pre. In short, some folks could have had a Pre for what is essentially $99.

Sprint took the offer down a few hours later. The official explanation is that the deal was "put into the system in error."

This is the second close call with the $99 price point. Best Buy (NYSE: BBY  ) blundered when it mistakenly offered the smartphones at $99 through some of its stores back in July.

Well, now Sprint is willing to split the difference. As of this morning, the Pre has been marked down to $149. I wonder whether that price point will last, or if that, too, was "put into the system in error." It's a good deal, but it may not be good enough.

Of course, it's just a matter of time before we begin seeing $99 Pre phones in the wild. At least one analyst believes that Pre sales are fading after the initial buzz behind Palm's June launch. Sprint will also be busy promoting Google's (Nasdaq: GOOG  ) latest Android-powered model at $180 next month, and perhaps that's what prompted the tactical $50 haircut today.

Pricing isn't entirely up to Palm. Keep in mind that dropping the Pre from $199 to $99 doesn't mean Pre will be making half as much as it used to. Carriers subsidize the hottest Apple (Nasdaq: AAPL  ) , Research In Motion (Nasdaq: RIMM  ) , and Palm gadgets to the tune of hundreds of dollars apiece. The carriers know they will be milking subscribers with chunky data plans for at least two years, so it's OK to offer a Pre that costs $549 or thereabouts at $199 yesterday, $149 today, and eventually $99 tomorrow.

This morning's price is a start.

Apple stole the Pre's thunder when it began offering a $99 3G iPhone. The latest entry-level iPhone 3GS sets AT&T (NYSE: T  ) customers back $199, but Apple has the advantages of a sexy brand, video recording, and an App Store ecosystem that is 1.5 billion downloads and 65,000 apps strong.

Sprint has tried to position the Pre as a more cost-effective choice, given the carrier's cheaper data plan, but it can just migrate the same campaign to market its Android smartphones next month.

Palm can't let it come to this, even as it lines up new carriers and gears up to this the market with new smartphones, such as the smaller Pixi, which was announced this morning.

If it's too late to strike while the iron is hot, it may as well make a move while the Pre is still at least lukewarm. Inertia is pulling Palm to the $99 price point. It had better get there before the Android-backed HTC Hero takes a call next month.

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Best Buy and Sprint are Motley Fool Inside Value selections. Google is a Motley Fool Rule Breakers recommendation. Apple and Best Buy are Motley Fool Stock Advisor picks. The Fool owns shares of Best Buy. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz is starting to see more smartphone products creep into his home lately, but he owns no shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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