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Analyst: Palm Will Sell 1.5M Pres In First Year

Let the guessing games begin. An analyst from Citi issued a note recently, stating his belief that Palm should be able to convince 1.5 million people to adopt the Palm Pre as their next smartphone. Will it happen?
Let the guessing games begin. An analyst from Citi issued a note recently, stating his belief that Palm should be able to convince 1.5 million people to adopt the Palm Pre as their next smartphone. Will it happen?Anyone notice the jump in Palm's stock last Thursday and Friday after the Pre was announced at CES? The announcement of the long-awaited, next-generation software and hardware from Palm had a significant impact on the company's stock price.

Citi analyst Jim Suva said in a recent note:


Our estimates move significantly higher on the strength of the Pre; however, we still forecast operating and net income losses for the next few fiscal years. Although we are very optimistic on unit volumes, we are taking a fairly conservative view on ASPs and margins. While reaction was overwhelmingly positive (and rightfully so in our view), very little was asked or offered on Palm's pricing strategy for the Pre. We think Palm will soon have to offer details on expected ASP for the Pre and will likely revisit our estimates in the future. That said, even with a fairly conservative ASP and margin expectation, our forecasted operating losses narrow dramatically and we would expect that trend to be echoed in consensus estimate.
In other words, after a few unknowns are disclosed, the Pre could truly breathe some new life into the much-beleaguered Palm.

It is worth pointing out that Suva's estimate only considers a U.S. launch of the device. We already know that a UMTS version of the Pre is in the works. If/when that variant of the phone will come to market is unknown. Sprint has an exclusive of the Pre at launch. Neither Sprint nor Palm said how long that exclusivity will last. I'd be shocked if it were more than 90 days. That means we may see the UMTS version of the Pre as early as August.

The pricing issue will be key. As I reported over the weekend, guesstimates of the Pre's price are putting it at or near the $200 mark. With such a price point, it's sure to move the phone in serious numbers. Will it move 1.5 million of them on the Sprint network? I'd bet Sprint is praying for just that outcome.