The Palm Pre’s US launch broke records for partner Sprint, but its momentum is threatened by possible manufacturing flaws and Apple’s new phone and pricing announcements.
Underlining the importance of the smartphone to the mobile business today, the Pre and the fast new 3G S iPhone were announced within days of each other.
Last weekend's Pre launch broke Sprint's records for first-day and first-weekend sales, with analysts estimating weekend sales of between 50,000 and 200,000 units.
Sprint launched an advertising campaign focusing on the Pre's ability to perform true multitasking, unlike the iPhone.
But customers have been reporting problems with screen distortion, possibly caused by an overheating problem.
The distortion reportedly appears at the bottom of the Pre's screen, and forms a circular pattern. Palm has yet to acknowledge the issue, Gizmodo said.
The company also faces tough competition in the form of the new iPhone 3G S. Analysts expect the launch of the handset will overshadow the Pre.
“As usual, [Apple] created a great balance of anticipation and last minute nerves ahead of its new handset launch, and got its timing just right, leaving the Palm Pre only a couple of days in the sun,” Rethink Wireless analyst Caroline Gabriel said.
And reducing the price of the 8GB iPhone 3G to just $99 may force Palm to reduce the cost of the Pre, according to Julien Blin, principal analyst at JBB Research.
“As Apple’s $99 iPhone starts to gain traction, the rules of the game could change very quickly,” he said.
“Here is my question: How far down can the Palm Pre go down in price now that Apple introduced a $99 iPhone? $120? $99? Clearly, this could become quite problematic for Palm as the $99 iPhone starts to gain good traction.”
The 3G S, meanwhile, is not as revolutionary as the hype would indicate, Gabriel said. “In terms of actual phone capabilities, the iPhone remains short of the superphone league,” she said.
And with exclusive US carrier AT&T delaying tethering capability and MMS support in the iPhone's home market, Apple may be under pressure to sever ties with the operator and forge new partnerships.
Ovum analyst Tony Cripps said that while the new handset may be seen as suffering from a lack of innovation, Apple's was proving the value of firmware upgrades as a means of refreshing devices and improving the user experience.