In a research note issued Monday, Jesup and Lamont analyst Kevin Dede says as much, arguing that the company’s shares are overvalued, particularly in light of Pre returns.

“We stood just as the Street now stands, completely enamored with Palm’s highly innovative new device; however, our checks now lead us to believe that while initial sales could almost be categorized as ‘gangbusters’ and perhaps above initial assumptions, we think there are engineering complications that are driving a higher level of returned devices than otherwise expected.

“From a hardware perspective,” Dede continues, “the Pre includes the features expected in a cutting-edge smartphone, including a large touch screen, one of the most powerful processors designed for a handset, and a slide-out keyboard; we understand that a great many returns are on account of an unsatisfactory experience with the keyboard operation and dead pixels in the screen. Fixing these issues shouldn’t pose a problem, but we think the timing risk and severity should be reflected in the shares.”

Dede notes that his impromptu survey of local retail outlets–Sprint (S), Best Buy (BBY) and Radio Shack–revealed that about one in three devices is being returned. He cites, as well, a survey on Pre Central that suggests roughly 40 percent of initial Pre sales are exchanged.

Now, to be fair, this is anecdotal evidence at best. The Pre Central survey, which at present has only 615 respondents, is hardly statistically relevant. That said, Pre Central is a top Pre fan site, and Palm’s own forum has quite a few complaints, as does SprintUsers. So clearly, something’s going on here.

Reached for comment on the issue, Palm had this to say: “We think the Palm Pre is the best product we’ve ever shipped. While we haven’t seen anything out of the ordinary we will continue to closely monitor both Palm and Sprint customer service channels.”

Despite concerns about the Pre’s build quality and Dede’s contention that the company’s stock is overvalued, the analyst sees good things ahead for Palm. “In light of the overwhelming evidence supporting continued growth of converged devices, we believe Palm addresses the most enchanting segment of the mobile device market and should experience at least market growth over the longer term.

“Shorter term is obviously more interesting, and we believe Palm’s technology positions it to gain share at the expense of those companies offering less attractive, less functional devices,” Dede adds, concluding, “The competitive technology race boils down to ease of use across an increasingly complex technical environment.”

UPDATE: Concerned that its survey has been taken out of context, Pre Central is running another poll on Pre build quality, this one on its blog, rather than its forums. And while it’s no more statistically relevant than the original, it’s worth noting. Because with more than twice the number of respondents, it shows just 18 percent of initial Pre sales being exchanged.

Which is exactly what Data Domain did.

One consolation: NetApp (NTAP) may have failed as a suitor, but it received a $57 million breakup fee from Data Domain (DDUP) as a result of the termination of the agreement.

Still, it’s a tough blow for NetApp (NTAP), which will now focus on “existing growth opportunities” instead of ill-starred bidding wars with rivals.

Said Dan Warmenhoven, NetApp’s chairman and CEO: “While NetApp’s acquisition of Data Domain would have produced benefits for customers and employees and complemented NetApp’s existing growth trajectory, we remain highly confident in our already compelling strategic plan, market opportunities, and competitive strengths.”

“NetApp applies a disciplined approach to acquisitions, one focused intently on creating long-term value for our stockholders.” Warmerhoven added. “We therefore cannot justify engaging in an increasingly expensive and dilutive bidding war that would diminish the deal’s strategic and financial benefits. NetApp has established leadership positions in virtualized infrastructure, storage efficiency, and unified storage, even in these difficult economic times, by helping customers meet their business objectives with less physical storage while reducing costs. That commitment will not change. We look forward to continuing to build on our foundation of innovation and customer service, and to continuing to execute our successful growth strategy.”

[Image credit: despair.com]

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.

Why is Dell so hot for a six-year-old company that, according to papers filed with the U.S. Securities and Exchange Commission in August, made just $68 million in revenue last year and has never been profitable? Well, for one thing, EqualLogic is maker of iSCSI storage-area network virtualization technology–the fastest-growing part of the storage business.

For another, shares of VMware–the current leader of the storage business–have quadrupled since the company went public nearly three months ago (in August EqualLogic filed to go public, something it now won’t have to do).

Finally, it makes Dell more of an enterprise company and less of a box builder. Which is likely a good idea for a company that ranks near the bottom of the American Customer Satisfaction Index’s annual rankings of personal-computer makers.

Dell scored 74 points out of a possible 100, putting it near the bottom of the index’s annual rankings of personal-computer makers. Though the company staffed up its call centers and outfitted its tech support staff with a new arsenal of tools, it was unable to shake the public’s perception of its products and services as unreliable. And the New York attorney general’s decision to sue it for consumer fraud did little to help matters.

“We saw Dell drop like a rock in customer satisfaction in 2005,” said Claes Fornell, a marketing professor at the University of Michigan, which conducts the annual study. “Since then, it’s been difficult for Dell to come back.”

Which is not to say that it’s easy to maintain a high ranking once you’ve attained it. Though Apple still leads the PC vendor category, its rating fell from 83 last year to 79, apparently thanks to growing pains. “With more than $21 billion in revenue, Apple has grown by nearly 400% in sales during the past five years,” Fornell explained. “Recent demand for Mac computers is up by about 25%, which is more than twice the rate of growth for the overall PC market. Many analysts seem to believe that Apple is gaining market share in part because of iPod users switching to Mac computers. It is very difficult to ensure that both customer service and satisfaction stay high when a company suddenly needs to service many more customers. This is probably what is behind the decline in customer satisfaction for Apple. According to the Economist (6/9/07), there are also ‘grumblings about manufacturing defects and customer service.’”

Many of us Sprint customers received a letter at the beginning of this month declaring that our Sprint account will be canceled on July 30 due to the amount of roaming we are doing. The letter stated that they believe that another carrier will be able to serve us better and that we are recieving the boot.

“… This is the icing on the top as far as Sprint Customer Service goes. Why on Earth I can’t get coverage at the United States Military Academy, 40 minutes away from New York City, is a mystery to me. I had a cellphone the entire time I was in Iraq with a Middle Eastern company. I payed LESS to call home and keep in touch from the other side of the world than I do now with Sprint to call within the country. It also did not matter if I was in a major city or out in the middle of nowhere in the desert, I ALWAYS had full coverage. Never had a dropped call, and the customer reps of that company spoke better English than those with Sprint do.”

–An anonymous U.S. soldier who had his Sprint contract terminated for excessive domestic roaming

Here’s a novel, albeit labor-intensive, way of ditching your Sprint contract to get an iPhone. Call the company’s customer-support center relentlessly until it terminates your service. After a recent internal review, Sprint canceled the contracts of 1,000 customers because they’d been making far too many calls to its support centers. An astonishing move for a company that’s been on a campaign to shirk its reputation for abysmal coverage and even worse customer service.

But not nearly as astonishing as its decision to waive the termination fees of the customers it fires. (It will be even more astonishing if the company agrees to pay $200 in termination fees to each of the customers, as Mindy Bockstein, chairwoman of New York’s Consumer Protection Board, has asked). “Our records indicate that over the past year, we have received frequent calls from you regarding your billing or other general account information,” Sprint explained in a letter to some of its customers. “While we have worked to resolve your issues and questions to the best of our ability, the number of inquiries you have made to us during this time has led us to determine that we are unable to meet your current wireless needs…”

Apparently, Sprint is finally finishing its pioneering work on DCRM (Dissociative Customer Relationship Management) systems …

Now, in all fairness, the 1,000 or so subscribers whose contracts Sprint canceled accounted for 40,000 calls per month–according to Sprint. And, really, 1,000 isn’t such a large number when compared to Sprint’s total user base–about 53 million. Finally, Sprint insiders say these problem costumers were truly pains-in-the-ass. “These were the customers that had nothing to do but call us every single day demanding credit,” a Sprint employee told Consumerist. “And they were getting it because customer care was getting exhausted from arguing with them. So, a nickel at a time, these customers were collecting literally thousands of dollars in credit balances. … Ten months of calling customer care and telling us how badly they hated us and threatening to cancel to get more credits… And one day we say, ‘OK. We’ll credit your balance, waive your contracts and you’re free to be happy.’ And then they don’t like the ink the letter was written with. Kills me. I’d be devastated if I got a letter like that from a company I do business with. But if I hated them I’d gladly walk away in a situation like that.”

I suppose you might. Especially if you truly had problems with Sprint’s service that you were having trouble resolving–which, given the company’s reputation for lousy customer service, is a distinct possibility.