Sprint CEO to Pre Buyers: Get Your Sleeping Bags Ready
by John Paczkowski
Posted on May 20, 2009 at 4:00 AM PT
One of the simplest ways to create a shortage, and the buying frenzy that typically accompanies it, is to announce that there will be one. And this is precisely what Sprint CEO Dan Hesse did for the Palm Pre Tuesday. Speaking at J.P. Morgan’s Global Technology, Media and Telecom Conference shortly after Sprint announced the handset’s street date, Hesse said he anticipates that supplies will be limited, at least initially. “We don’t intend to advertise it heavily early on because we think we are going to have shortages for a while,” Hesse said. “We won’t be able to keep up with demand for the device in the early period of time.”
Interesting thing to say in advance of a product launch on which so much is riding, don’t you think? Unless you’re already trying to foster the perception of excess demand. As Gartner analyst Hugues De La Vergne noted last month, “It’s important to have a success like selling out. The Pre has to live up to the hype or else they’ll lose their momentum to rival products coming out soon after.” And clearly, that’s a very real danger here. Though, to be fair, there are other possible explanations. It could simply be responsible production scheduling. It might also be that Palm’s financial situation has forced the company to temper its launch run-rate in order to retain adequate capital for marketing and customer service. Or it could be that Pre really is the blockbuster device Palm (PALM) and Sprint (S) believe it to be and no amount of supply will be enough to meet the initial and overwhelming demand for it. It could be that the Pre is the next Apple (AAPL) iPhone.
“What the iPhone has shown is that if you really do have a compelling device that is revolutionary then customers will switch to your service,” said Hesse. “We think the Palm Pre stacks up very well against the iPhone.”
We’ll find out come June 6.
Comments
There is no question that the Pre is a far better phone than the iPhone, however there are many other headwinds the Pre will initially face. One of which is the consequences of entering the market late, however not too late. All those remaining Sprint customers who have remained loyal to their wireless provider will definately make the eventual switch if the Pre is compelling enough, however many Smart phone users will remain with ATT until Pre is mature enough to prove its superiority. Nevertheless, no matter how good the Pre turns out to be you will always get consumers that prefer one provider over the other. This being said, the potential for the Pre to corral a large segment of the market is indisputable if the phone is anything close to what the pundits purport. One should note that the iPhone has less than 5% of the Smart phone market, and the Pre’s success does not rest on the iPhones demise. Actually the rivalry will in itself generate a market for both phones without their respective companies needing to outlay substantial resources. The media’s proclivity to create rivalries is ubiquitous, which should be a boon for the Pre. The Pre can’t fail and won’t fail regardless of what the
Posted by darius arya at May 20th, 2009 at 8:58 amShorts are promulgating. I will now have an iPhone and a Pre.
Let’s assume that 5% of Sprint’s customers (49 million) opt to go for the Pre, that would be approx. 2.5 million customers for Palm. Now let us assume another 2.5 million consumers opt to make the switch over the next year, which would be an aggregate of 5 million new Palm Pre consumers. Assuming Palm nets $300 per phone (incl. accessories), netting Palm $l.5 billion, not bad. Palm’s current market cap. is approx. $1.5 billion. I feel these estimates are conservative, however they are dependant on the logistics and supply chain.
Posted by darius arya at May 20th, 2009 at 9:11 am