Palm moves into mini-smartphone business

Palm (PALM) must not think that its new Pre smartphone gets it into a broad enough portion of the handset market. As of September 9, it will be offering a new and much smaller phone called the Pixi. The handset will be available exclusively from Sprint in all of its outlets before the holidays.

The struggling firm announced that the "Palm Pixi lets you express yourself in amazingly useful ways." The Pixi will be loaded with social network applications, including Facebook and LinkedIn, use the Palm webOS and have a full keyboard. The handset will be exclusively marketed by Sprint (S) and is available for $149.99 (after a $150 instant rebate and $100 mail-in rebate) with a two-year service agreement.

The Pixi appears to be aimed at the youngest users of smartphones, and while that extends Palm's footprint, it raises the question of how large that market is, especially during a downturn. With discretionary income running low in most households, analysts have to wonder whether consumers are willing to buy a handset with a two-year subscription plan for their children.

Palm is bolstering its new reputation for being bold. One of its board members, Roger McNamee of Elevation Partners, has said the Pre will bury competition like the iPhone. While that may not be true, it is probably a good way to rally his troops. McNamee and his management team have made believers out of Wall Street. Pre sales appear to be good enough to have pushed Palm's stock price to almost $15 from a 52-week low of $1.14. If early sales of the Pixi are good, that price may have further to run.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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