Summary
Palm gained resurgence with the Pre from its handheld legacy, and Sprint’s controlled rollout might create urgency for Palm to rush to Verizon and AT&T with new models.
Analysis
Beyond Pre vs. iPhone technology and a price war, what does Sprint gain? Does the Pre impact Sprint’s net activations for the second quarter results? The store-exit surveys of UBS Investment Research reported that 70% of the first-buyers were existing Sprint and 40% were Palm users. If Palm sells 1 million Pre’s and Sprint gets 25% new customers or 250,000, the impact is negligible on contract or postpaid churn. Sprint lost 1.25 million contract customers for the first quarter, and 1.1 million postpaid during the last year’s fourth quarter. With 250,000 new Pre customers, Sprint would merely reduce its churn by about 25 basis points to 2.0%. The only positive indicator is that Sprint’s total churn was 2.45% in the first quarter of 2008. AT&T and Verizon were at 1.2% and 1.14% on postpaid churn during the first quarter.
Did Sprint have enough Pre units in its own stores to retain customers with phone upgrades and contract renewals? And did Best Buy and Radio Shack have sufficient Pre inventory to convince customers of other carriers to choose Sprint? Or did the Pre attract store traffic that became business for other carriers and manufacturers? Palm perhaps realizes the urgency to create other models for Verizon and AT&T. Sprint pitched the advantages of the Pre’s controlled rollout. The limited launch inventory would improve customer service, build pent-up demand, and establish brand loyalty. Did Sprint miscalculate the pace of mobile technology? Let’s await the second quarter results to see if Sprint reduced its churn and won carrier-switchers. The highlight of Sprint’s quarterly results might be the sales of the Boost $50 Unlimited. Palm’s next actions could also have implications for future exclusives with carriers, and the role of Best Buy and Radio Shack versus carrier stores.
