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Palm dangles developer discounts

Palm offers registered software developers discounts of up to 40 percent on one to three devices, according to an e-mail seen by CNET

Palm is trying to lure its software developers into buying handheld computers by offering steep discounts.

The No. 1 handheld maker highlighted the move in an e-mail sent to developers Wednesday. In the e-mail, which was seen by CNET, Palm General Manager Alan Kessler offers registered developers discounts of up to 40 percent on one to three handhelds.

With 155,000 developers worldwide, the discounts could potentially help Palm reduce its current excess of inventory.

Palm spokeswoman Ronni Sarmanian confirmed the e-mail's authenticity Thursday.

In the e-mail, Kessler couched the discounts as a "'thank you' for helping us build a strong and open Palm Economy." The discounts are also in recognition of the recent release of the 10,000th application developed for the Palm operating system, Kessler said in the e-mail. Palm has long credited developers for the success of the Palm OS, which is used in 90 percent of handhelds.

Kessler extolled the deal for the extra Palms as an "excellent opportunity for you to increase your (quality assurance) and field testing pool."

Palm is discounting the m100 and m105 by 35 percent and the IIIc, Vx and VIIx by 40 percent, according to the e-mail. The m100 drops from $129 to $83.85; the m105 from $199 to $129.35. The IIIc and Vx both slide from $299 to $179.40. And the VIIx drops from $199 to $119.40.

The discounts last through Aug. 31.The promotion supercedes the discounts that some developers already receive.

The promotion isn't without flaws. The e-mail was intended for the 90,000 developers in the United States, Sarmanian said. But it inadvertently was sent to developers worldwide. So far, she said, only a "very small" number of developers outside the United States have responded. Palm will attempt to accommodate them, she said.

For the past several months, Santa Clara, Calif.-based Palm has been trying to rid itself of excess inventory related to an overcommitment to parts makers and a drop in consumer demand. The company recently has been cutting prices on devices sold to consumers, forcing rival and Palm OS licensee Handspring to follow suit.

Some analysts are concerned that such a price war will eat up Palm's cash reserves, which the company needs to return to its previous profitability.

"Cash generated from device sales should be way down, owing to aggressive price reduction required to move aging channel inventory," Merrill Lynch analyst Melanie Hollands wrote in a research note Thursday.

The cash attrition could also lead to further job cuts on top of about 250 layoffs in April, according to Holland.

"Cash preservation has become a pressing issue for Palm as it reduces operating expenses and evaluates alternatives for raising capital. We understand that there could be additional employee cuts," Hollands wrote.