Analysts refute latest Verizon-Palm Pre rumor

A story reported by TheStreet.com about Verizon Wireless not carrying the Pre early next year is likely bogus, Deutsche Bank and Morgan Keegan analysts say.

Will it or won't it? That's the question that Palm Pre fans are asking. They want to know if the Palm's touch-screen phone will be offered by Verizon Wireless early next year.

TheStreet.com reported late Thursday that sources close to the companies said Verizon was considering not offering the phone on its network, as had been expected. But now analysts are saying the rumors are likely bogus.

Palm Pre Sprint Nextel

"Our checks continue to point to healthy carrier demand for the Pre early in calendar 2010," Deutsche Bank's Jonathan Goldberg said in a research note published Friday. "We believe Palm has placed orders with the supply chain for another version of the Pre, with features highly consistent with a Verizon launch."

Verizon Wireless CEO Lowell McAdam said in June, before the Pre was even launched , that he expected the device to be on Verizon's network within six months. Sprint Nextel currently has a deal to be the exclusive U.S. carrier of the Pre .

Neither Verizon nor Palm would publicly comment on the speculation. But on Thursday, Palm reiterated its financial guidance, which it gave just last week, when it reported third-quarter earnings . In a notice announcing that the company is raising about $360 million through a public offering, Palm "reaffirmed its fiscal-year 2010 outlook, and its planned product and carrier launches in the second half of Palm's fiscal year, ending in May 2010." The E-Commerce Times wrote on Friday that Verizon's Jim Gerace had confirmed the company still plans to bring the Pre to its network in January, and a source familiar with Verizon's plans later confirmed the plans.

Several analysts have also said they don't buy the rumor that Verizon would snub the Pre. Tavis McCourt, an analyst at Morgan Keegan, said in his research note that Palm's upbeat guidance would require the company to launch the device on Verizon's network. He also pointed to Verizon's long history with Palm.

"Verizon has carried just about every Palm product in its history, and the Pre is clearly the best," McCourt wrote in his note. "We do not have insight as to the marketing support Palm will get from Verizon, but we see little risk in not getting a placement at this carrier."

McCourt also said that he expects the Pre to hit Verizon's network in February. He suspects that the rumor had more to do with investors wanting to influence the company's stock price than any actual change at Verizon. He notes that just before Palm finalized its new funding this week, rumors were circulating that Nokia was looking to buy Palm. The news of the funding deal lifted the company's stock price. And when the subsequent rumor about Verizon not carrying the Pre surfaced, the stock dipped.

"The timing of the rumor, post-deal, makes it equally as dubious as the timing of the 'Nokia will buy Palm' rumor during the roadshow," he wrote.

While McCourt agrees that it's unlikely that Verizon will spend a lot of money marketing the Pre, he said it's not unusual for carriers to spend much less on marketing a device that has already been out on another carrier's network.

"Normally, for an exclusive like the Pre or the (BlackBerry) Storm, the carrier will provide more marketing support," he said in an interview. "But the Pre will have already been out for seven months. So I wouldn't be surprised if Verizon doesn't commit as much money to marketing it."

So what is a smartphone consumer to do? Since neither company is responding to the rumors, it's difficult to say for sure what will happen. But these analysts seem pretty confident that the Verizon Pre is still a go.

Verizon consistently wins high marks for its reliable network. And the company has one of the widest coverage footprints. But customers have long complained about Verizon's lack of cool handsets. So many customers have been waiting for the Pre. And many others are hopeful that Apple's iPhone will come to wireless carrier next year.

Verizon isn't saying anything about unannounced products. But the company is building its next-generation LTE network, which will go live next year. And there is speculation that Apple might announce products that work on that network. Verizon also has its Open Development Program, which allows any device maker to quickly get devices certified for services that run on the Verizon Wireless network.

Updated at 5:21 p.m. to include a statement from Verizon to the E-Commerce Times, saying Verizon still intends to offer the Pre to its customers in January, and at 6:16 p.m. with confirmation from a source.

 

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