Will iPhone Users Defect to Palm's Pre?

This summer will be the perfect time for Palm Inc. 's new Pre smartphone to nab customers who purchased the original iPhone, Palm investor Roger McNamee said Thursday.

The Pre is schedule to come out in the first half of this year, and it will be an exclusive for Sprint Corp. (NYSE: S). Powered by webOS, the Pre is targeting a similar demographic that bought the iPhone.

"You know the beautiful thing: June 29, 2009, is the two-year anniversary of the first shipment of the iPhone," McNamee told Bloomberg. "Not one of those people will still be using an iPhone a month later."

McNamee, who is the co-founder of Elevation Partners, characterized iPhone buyers as people who wanted the "coolest product on the market." McNamee sees the Pre, with its touch screen, slide-out keyboard, and innovative user interface, as the latest must-have gadget.

Elevation Partners, Palm, and Sprint have a lot riding on the release of the Pre. Elevation has invested more than $425 million in Palm over the last two years, and it's looking for a sizable return. Palm was once the king of the U.S. smartphone market, but it has steadily lost customers to Apple Inc. (Nasdaq: AAPL) and BlackBerry 's BlackBerry. It's banking on the Pre and webOS to lead it back to prominence.

Sprint was the only major U.S. carrier to lose customers during the last quarter, and it continues to see subscribers leave for its rivals. By having the Pre as its flagship handset, Sprint could have a compelling alternative to AT&T's iPhone 3G, Verizon Wireless' BlackBerry Storm, and T-Mobile's Android-powered G1.

Apple likely won't rest on its laurels when the iPhone's two-year anniversary arrives. The company has developed a pattern of releasing a new smartphone during the summer, and many industry watchers expect a beefed-up iPhone later this year.

— Marin Perez, InformationWeek

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