Palm debuts "Pre" smartphone, operating system at CES

By Franklin Paul and Sinead Carew

LAS VEGAS (Reuters) - Palm Inc took the wraps off its overhauled mobile operating system on Thursday and introduced a touch-screen phone, raising hopes the move can help it win back customers from rivals such as Apple Inc's iPhone.

Palm shares jumped nearly 35 percent, or $1.15, to close at $4.45 on the long-awaited announcements, which were made at the Consumer Electronics Show in Las Vegas.

Palm debuted the Palm Web OS, the new operating system developed under the watch of former Apple executive Jon Rubenstein, who helped create the iPod.

It also unveiled the Pre smartphone, a touch-screen device with GPS, Wi-Fi and a slide out full keyboard. It will be available exclusively on the network of No. 3 U.S. mobile carrier Sprint Nextel Corp in the first half of 2009.

Palm has been staking its future on the launch of the new operating system and phone, which it has been developing since 2007. The company, the pioneer of touch-screen phones with the Treo, had been steadily losing market share to the iPhone, Research in Motion Ltd's BlackBerry and other devices.

Analysts at CES said they were impressed by the Pre, but JPMorgan analyst Ehud Gelblum noted the exclusivity agreement with Sprint could limit sales. Sprint, which has been struggling to stem subscriber losses, trails well behind rivals Verizon Wireless Inc and AT&T Inc.

"Palm bet the company on this so they had to come through and they did," said Gelblum. "The only drawback is how long is it going to be on sale only with Sprint? It's a smaller addressable market than they otherwise would have had."

The new operating system may make Palm, which got into the smartphone business by buying rival Handspring Inc, a more attractive takeover target, another analyst said.