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Palm closing retail stores, paying out Treo owners

Two pieces of bad news for Palm this week (not that there's been a lot of good news lately): it's going to have to pay out cash rebates on some Treos, and it's closing its retail stores.

Palm has decided to close its retail stores as it faces the effects of a class-action lawsuit filed by Treo owners.

Palm announced on Wednesday that Treo 600 and 650 owners who have had their units replaced or repaired at least twice are eligible for cash rebates on new Palm smartphones, as part of a settlement of a class-action suit filed in 2005. The company will also repair any Treo 600 or 650 that hasn't failed twice, but is outside of the original warranty.

Thursday brought news that the company's 34 stores--eight Palm-branded locations and 26 stores that were inside Airport Wireless outposts--will have to go by the end of the current quarter. "We continue to focus our company around core business initiatives and are consolidating more resources behind fewer programs in order to compete most effectively and build world-class, category-defining mobile solutions. We have therefore made the decision to close our retail stores," the company said in a statement regarding the retail move.

The two announcements were made separately, but it's not hard to see one affecting the other. The rebates are only for users who purchased, or plan to purchase, a new Palm smartphone after sending their old one in for repairs at least twice, which is kind of expecting a lot of those folks, I think.

I haven't had any problems with my older Treo 650 or the Treo 700 I currently use, but if I had sent it in twice for a repair, I'd probably be looking at a different manufacturer when it came time to buy a new one. The company denied the plaintiff's claims that Treos failed at unacceptable rates, but felt it would have cost more to fight the lawsuit than it would to settle it now.

Palm is going to have to come up with $75 for any such Treo 600 owner who bought a new Palm smartphone between September 30, 2005, and six months after the settlement becomes final. Treo 650 owners can get $50 back on the purchase of any new Palm smartphone during the six-month period after the settlement becomes final. A final hearing is scheduled for May 2. If you think you might be eligible, check out this site for more information.

Palm has plenty of work ahead of itself getting to work on its next-generation operating system for its smartphones, as well as continuing to expand on the early success of the Centro. A new hardware design that doesn't cause as many problems as the Treo would also probably be a good idea.