Palm laying off staff, Palm Pre collecting dust on the shelves?

The truth is out there Palm has recently made it clear they intend to seek their fortune purely in the consumer field, but unfortunately it seems their bet is misfiring rather badly.

SeekingAlpha reports that, despite repeated price cuts which saw the stylish $199 smartphone being reduced to a rumoured bargain-bin $79 on contract the device is still clogging up the warehouses and shelves at Sprint, Amazon and Bestbuy.

Says Gerald Hallaren:

Our best information says Sprint activated a little less than 375,000 Palm Pres as of the end of August. This left about 275,000 or 11 weeks of Palm Pres in “Sprint channels” at the end of August. This is not to say Sprint is carrying 100% of the cost of these phones. Best Buy , Radio Shack, Walmart , Amazon and Letstalk.com are all likely carrying some of this inventory cost. How much we do not know. What these dealers’ return rights, price protection, rebates or other incentives are we also do not know. These dealer terms and conditions vary greatly with the phones. However, the core economics around the Palm Pre’s market are slipping.

Sprint reduced the price by 25% to $149 only 93 days after first shipping the Pre. Amazon is selling it for $99. Walmart and Letstalk.com are both offered "specials" on the Pre for is $79. While undoubtedly some expect lower prices will improve demand, we believe the lower prices are more likely to blunt some competitive impact. There are more smartphone competitors today than at time of announcement. HTC’s Hero, Touch Pro2, and Snap, a reworked Blackberry Tour, and Palm’s Pixi are all recent entries to Sprint’s smartphone line up. Moreover, we do not believe Sprint has announced all of its new smartphones for the Christmas season.

There are even reports that, despite carrier expansion in US, the smartphone would not do much to bolster the company’s bottom line:

Verizon could offer to launch the phone at a price point of $129 with a $150 subsidy making the platform unprofitable for PALM.

The perpetually beleaguered smartphone maker is now rumoured to be laying off staff in US.  Of course they may simply be letting go their Windows Mobile team. Who needs steady, high margin enterprise customers after all?

Read more at SeekingAlpha here.

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