Palm unveils Pixi phone, may be overshadowed by rivals

By Franklin Paul

NEW YORK (Reuters) - Palm Inc on Wednesday announced a lower-priced smartphone in the same family as its popular Palm Pre, although the move may be overshadowed by rival product launches by Motorola and Apple.

Palm said it will start sales of the Pixi, a candy bar-shaped multimedia handset with a full keyboard, ahead of the holiday shopping season. Like Palm's popular Pre, Sprint Nextel Corp will be the exclusive provider in the United States.

The price will be revealed later, Palm said, adding that the smaller and lighter Pixi would cost less than the Pre, which will be marketed as a premium product. Several analysts predict the phone will sell for $99 after rebates.

Separately, Palm cut the price of the Pre by $50 to $149, after a $100 mail-in rebate, for new customers that sign a two-year service contract.

The announcements failed to buoy Palm's shares, which fell about 5 percent after Credit Suisse analyst Deepak Sitaraman cut his rating on the shares to "neutral" from "outperform."

He cited concerns about weaker-than-expected sales, and Palm's decision to stick with Sprint, rather than AT&T or Verizon Wireless, and the dearth of information about when Palm's new phones based on its "WebOS" operating system will make it to these carriers.

"With the announcement of the new Palm Pixi to be launched exclusively at Sprint toward year end (we expected the device to launch with AT&T or Verizon), we believe our previous estimate of 10 percent smartphone share for Palm in 2010 at each AT&T/Verizon may now prove optimistic, given Pre/Pixi are unlikely to be promoted aggressively when they land at these carriers next year," he said in a client note.

OVERSHADOWED?