MoneyWatch Tech

Verizon Fire Sale on Pre Smartphones Turns Palm into Toast

By Erik Sherman

Updated on: April 1, 2010 / 2:52 PM EDT / MoneyWatch

One thing that poor, beleaguered Palm (PALM) doesn't need is more bad news. Unfortunately, it is still coming in and, again, from Verizon (VZ). According to Boy Genius Report the carrier today launches a promotion dropping the price of the Pre Plus to $49.99 and the Pixi to $29.99. That's just the beginning, and when you take all the promotion together, it screams that Verizon wants to dump its Palm Pre inventory.

There are a few reasons that retailers -- and when it comes to handsets, that's what carriers are -- drop prices:

create a loss leader to bring in customers and open the opportunity for other sales
adjust the price level to stimulate more demand, often with the financial support of the product vendor
get rid of inventory that has been slow to move and make room for something else

Both the Pre models are smartphones that haven't moved well for Verizon. I don't see the carrier as using them as loss leaders. What are they going to sell, wireless service? They can do that with less expensive phones or charge more for other smartphones. Palm is short on revenue and has limited financial ability to subsidize product sales just to show more units having moved. Granted, the company's strategy has seemed so confused that the idea of taking on more red ink just to show that people "want" the Pre might be something it would consider. However, it doesn't seem likely.

That leaves dumping inventory. Now take into account two other reported factors of the promotion. The Pre models come under the buy one-get one free category and Verizon has cut the price of the webOS mobile hotspot service, which lets the Pre act as a Wi-Fi router, from $40 to $0 for both new and current customers. Current customers with a Pre can add the service for nothing.

The Palm Pre has done poorly for Verizon since day one. Given the red-hot rumors that Verzion will eventually get an iPhone from Apple (AAPL), there is no reason for the carrier to keep on with products that do nothing for the bottom line. And that's bottom-line bad for Palm, given that AT&T (T) has put off introducing the Pre . I was giving Palm until the end of the year, but I wonder if it can go another six months at this rate.