Palm Pre Not Saving Sprint

Both Palm and Sprint, the Palm Pre's exclusive carrier, had hoped that the new touch-screen smartphone would prompt a mass exodus from Sprint's rival carriers, but so far, that hasn't been the case.

A survey of retail sites has reported that most Palm Pre buyers are already Sprint subscribers, Bloomberg reported, quoting a note from Wachovia Securities analyst Jennifer Fritzsche. The good news is the Pre is helping Sprint retain customers since the smartphone launched June 6. The bad news, however, is that the Pre isn't bringing new customers to Sprint.

Fritzsche's research suggests that the 3G Pre isn't wooing users away from Sprint's larger chief rivals, like AT&T and Verizon Wireless. Bloomberg indicated that Sprint has lost more than 4 million contract customers in the past year as its competition bulks up smartphone offerings, including the now-iconic Apple iPhone and the BlackBerry Storm from Research In Motion (RIM), the Pre's biggest foes.

In addition, the Palm Pre and its new webOS operating system now face an uphill battle against the new Apple iPhone 3G S, which is expected to hit stores this week, sparking a new clash of the touch-screen titans.

The iPhone 3G S and lack of customers jumping ship to join Sprint have hampered the early success of the Pre, the device Palm was turning to for salvation to thwart slumping revenues and device sales. Palm also hoped the Pre would help it recapture its reputation as a handheld trailblazer, an honor it received more than a decade ago with its Palm Pilot devices.

In addition to the Palm Pre's rough start, the industry is also buzzing that Palm may be the target of a possible acquisition, though Bloomberg reported that a takeover likely won't happen in the near term, quoting Pacific Crest Securities analyst James Faucette.

"The Palm operating system is the most valuable asset in the entire handset space, so for any company that has aspirations of being a player in smartphones, we think an acquisition makes sense," Faucette told Bloomberg, adding that the expected $5 billion price tag for Palm "would be a little difficult to digest" for interested buyers.