Sprint Nextel Corp Chief Executive Dan Hesse is counting on Palm Inc's Pre smartphone to help the company move past criticism about its customer service and network quality.
Ahead of the device's official launch on Saturday, Sprint executives said they hoped to move beyond consumers and draw in corporate customers, banking on the strength of the Pre's physical keyboard and raft of mobile email features.
We're a very different company than we were 12 months ago, Hesse told analysts and reporters. The Pre is the coming-out party for the new Sprint, to show off the new Sprint.
Pre is also pivotal for Palm, which is looking to claw back market share lost to rivals such as the BlackBerry from Research In Motion Ltd and Apple Inc's iPhone.
Palm and Sprint warned recently they expected shortages of Pre around the launch due to stronger than expected demand. Asked when Sprint expects production to meet demand, Hesse told Reuters after the event: It's ramping up now.
Prolonged shortages would likely hurt sales, analysts have warned, noting that Apple could soon announce a new iPhone and that Sprint's top rival, Verizon Wireless, has said it will be able to offer the Pre in six months or so. Verizon Wireless is a joint venture of Verizon Communications Inc and Vodafone Group Plc.
Hesse, however, told technology website CNET News on Friday that Sprint's exclusive U.S. deal to sell Pre went beyond the end of 2009, dismissing the notion that Verizon could have the phone in just six months.
He did not provide a timeline for how long Sprint's exclusive deal would last.
Sprint held the event primarily to push Pre as a device for business customers, which heavily favor BlackBerry phones for mobile email.
Its executives said they see Pre's physical keyboard as a big plus over the iPhone, which only has virtual touchscreen keys for typing or making calls.
That seems minor at times unless you actually have to type something, said Sprint vice president for marketing Tim Donahue. As business users, we want a keyboard.
EYEING SMALL BUSINESS
A common favorite among the early adopters was the sliding keyboard. At a low-key, invitation-only event on a drizzly Friday evening in New York for loyal Sprint customers, several users got their first taste of the gadget.
The screen is amazing. The pictures are super bright and crisp and the Web browsing is like using your regular computer, gushed advertising analyst Sean Kirwin, 39. It will take a little getting used to ... Once my fingers are used to the touchscreen, then it would be a lot easier to navigate.
While some analysts see Pre as having most appeal for consumers, Hudson Square analyst Todd Rethemeier agreed the keyboard may help appeal to some executives.
It's a better phone for businesses than iPhone, said Rethemeier. But he said that asking a BlackBerry user to move to Pre could be a hard sell.
It will succeed best with smaller businesses and individuals, the analyst said.
It will take some time to get any enterprise traction, said Avian Securities analyst Matthew Thornton.
It does not help that Sprint is launching the phone in a difficult economy. But Paget Alves, president of Sprint's business market group, described this concern as temporary and said he is seeing signs of improvement in the current quarter after tough fourth and first quarters.
In the second quarter things are beginning to move again ... It's not for a rapid recovery, but you can see a month-over-month improvement in the number of key people acquiring wireless services or thinking about it, he said.
The funnel of business opportunities is growing. A quarter ago it was flat.
While Sprint will continue to sell BlackBerry to business clients, Alves sees Pre winning over smaller corporations and some workers at enterprises whose employees are allowed to choose the latest phone as their business device.
I wouldn't describe this as a Palm Pre versus RIM war, said Alves, whose clients make up about 19 million of Sprint's total customer base of about 49 million.
Companies realize that if you accommodate your workforce, you're better able to attract those employees who are interested in the latest gadget.
Alves said he had held a conversation on this subject, for instance, with an executive at PepsiCo Inc.
Sprint also argues that Pre's support for popular consumer services, such as social sites like Facebook, as well as business features like corporate email, will help win business users interested in marrying life and work.
We as business people also have lives and want a device to help us bridge the personal and business, Donahue said.
Sprint shares were up 8 cents or 1.6 percent at $5.11 on the New York Stock Exchange, while Palm shares were down 58 cents or 4.3 percent at $13.06 in Nasdaq trading. In early trading, Palm shares hit a new 12-month high of $14.14.
(Reporting by Sinead Carew; Editing by Edwin Chan)