With the rebate, the 8MB handheld will now be priced at $199--the same price Palm is expected to charge for its M105 handheld, which sources say is on the verge of hitting the market.
The No. 2 handheld maker's rebate starts Sunday and runs through April.
Handspring, which uses Palm's operating system, has grabbed a significant share of the handheld market, particularly at the low end. It makes handhelds with an expansion slot and a price tag comparable to the Palm models without an expansion slot.
Jason Tsai, a vice president at brokerage C.E. Unterberg Towbin, said Thursday that unlike companies in the static PC market, Palm and Handspring have the ability to increase sales. It's just a question of which one will grow faster, and cutting prices should help spur the whole market, Tsai said.
"The overall impact is (that) it is increasing the sales of PDAs," Tsai said, referring to personal digital assistants.
In January, Mountain View, Calif.-based Handspring captured 26 percent of the handheld market, down from 27 percent in December, according to market researcher PC Data. No. 1 Palm's share was at around 60 percent in January, down from about 65 percent in December.
In addition, Handspring this week launched an online community site for its software and hardware developers to share information on where someone with an idea for a new Springboard module can get technical assistance. The site is being done in conjunction with a Sunnyvale, Calif.-based company called eLance.