The device, intended as a replacement for the Centro, Palm’s last PalmOS smartphone, is expected to feature a 2.6-inch multitouch display, inline keyboard, two-megapixel camera and 4GB of internal storage, among other features. Word on the street has it priced at $99 with contract, rounding out the lower end of Palm’s new webOS lineup.

And when will it arrive at market? No one seems to know, though Tavis McCourt and Justin Patterson at Morgan Keegan & Company speculate that we’ll see it sometime this fall. “We believe initial Pixie shipments will begin in the November quarter, although timing is still uncertain (we believe the goal would likely be a holiday launch),” the analysts wrote in a research note today.

“Although Pixie is unlikely to be a ‘hero’ product with massive advertising and subsidy support, its $99 price point should drive substantial volumes and we believe distribution can be broader initially if not exclusive. In general, we have used the Centro as a benchmark for the Pixie. At a $99 retail price point, the Centro peaked out at about 1 million units shipped/quarter with distribution at all of Palm’s significant historic customers. We have the Pixie ramping quickly to these levels in calendar 2010 as distribution ramps.”

That seems a reasonable expectation, especially if the Pixie isn’t exclusive to a single carrier. And at present, it’s thought that the device will be available, at least initially, from both AT&T (T) and Sprint (S).

So, as McCourt and Patterson note, Palm (PALM) could be poised for some significant gains in market share. “We expect Pre shipments of 2.2 million in 2010 (May 2010) and Pixie shipments of 1.2 million,” the analysts write. “Based on our bottoms up estimate, we forecast Palm will ship just over 7 million smartphones in fiscal 2011, which would likely represent about 4 percent of smartphone share, but a more meaningful–10 percent share of its core N. America market.”

[Image credit: Engadget]

Avian analyst Matthew Thornton cut his rating on the stock to Neutral from Positive. He says a survey of U.S. retail stores and discussions with management lead him to conclude that “smartphone units and sales are likely to come in below expectations for the next several quarters.” He also thinks the company will exit the May 2009 fiscal year with a much lower run rate for its Centro line, putting more pressure on new Palm OS products to meet or exceed expectations in fiscal 2010, “leaving less room for upside.” He cuts his price target on the stock to $5 from $9.

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The answer to the first philosophical riddle is debatable. The answer to the second?

Well, did you know that AT&T began peddling Palm Centros in its stores today with a new electric blue color and a $70 price tag? I bet AT&T (T) customers walking right by them on their way to pay for their new iPhone 3G didn’t either.

“They took the wrong day to do it,” said Charlie Wolf, a wireless analyst at Needham & Co. “It’s going to be drowned out by the hoopla around the iPhone.”

On the official Palm blog, the company yesterday announced plans to start selling a new electric blue version of the Palm Centro at AT&T stores starting on Friday.

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The Palm Centro

The two companies most often associated with corporate-issued devices, Research In Motion Ltd. and Palm Inc. are anxious to convert people like my friends. This week I tested Palm’s new attempt: the Centro (www.palm.com/centro). It looks like a hip, miniature version of the more expensive Palm Treo, with most of the same functions and only costs $99 after rebates and a two-year contract. The Centro comes in onyx and ruby, though the latter won’t be sold until next month.

Overall, I liked the Centro. It has plenty of pluses, including a touch screen, easy email set-up for personal accounts like Gmail and Hotmail, built-in instant messaging for three programs, a camera for still shots or video and expandable memory. It’s available now and runs on Sprint’s fast 3G network, costing at least $15 monthly for data on top of your voice plan. Like the Treo, it has a tiny stylus for detailed screen selecting and an on/off ringer switch.

RIM should be credited with introducing one of the first hip, mini smart phones to the demographic of 25-to-30-year-olds without smart phones. About a year ago, it brought out the $200 BlackBerry Pearl 8100, which is narrower than traditional BlackBerrys and is easy to mistake for a stylish cellphone. It uses a condensed keyboard with two letters per key that works using auto-correcting SureType technology, and has a glowing trackball for navigation.

For Palm’s Centro to compete with the Pearl, it, too, needed to be thinner left to right. But instead of doubling up letters per key and using SureType like the Pearl, the Centro has a shrunken version of Palm’s full keyboard; letter keys are squeezed so close together that large-fingered users will likely have trouble. I found the Pearl’s keyboard easier to use because its keys are flatter and larger compared with the Centro keys, which caused me to mistype messages. But the Centro’s tiny keyboard could be a real step up for people who still use their cellphone’s numbered keypad to type text messages.

The Centro’s touch screen saves time and makes navigation easier. The BlackBerry Pearl doesn’t have a touch screen, forcing users to do a lot of scrolling with the navigational trackball.

A success with the Centro would be much needed good news for Palm, which hasn’t had an easy go of it lately. While RIM has been cranking out more stylish BlackBerrys, Palm’s solid Treo hasn’t changed all that drastically in the past couple of years. Even loyal Treo users are starting to complain about Palm’s old operating system crashing. Of course, the popularity of Apple Inc.’s iPhone only rubs salt in the wounds of this once unstoppable company.

RIM will bring out a new Pearl, the 8130, next month to step up its game. This Pearl will be the same physically, but will have some internal changes, including the ability to work on the CDMA network, built-in GPS and upgraded software.

I tested a stylish ruby Centro and also got my hands on an early version of the BlackBerry Pearl 8130 from Verizon Wireless. Lined up side by side, the Palm Centro looks like a chubby version of the Pearl. The Pearl looks and feels sleeker and sharper than the Centro, due in part to the Centro’s rounded edges and tiny, bubble-shaped keys.

The Pearl is just a hair smaller in all directions — width, height and depth. The Centro is almost a full ounce heavier than the Pearl, but each weighs only 4.2 and 3.4 ounces, respectively. The Centro’s 320×320 resolution screen looks brighter than the Pearl’s 240×260 screen.

I focused on the Centro, setting up two personal email accounts on it in just a few minutes. I started out typing very slowly on the keyboard, which has keys made of a slightly sticky material. The more familiar I became with it, the faster I could go, but I’m still not completely comfortable using the keyboard.

I quickly navigated through the Centro’s menus using Palm’s familiar operating system. The touch screen saved me from arrowing around to select an icon or menu; I just tapped the screen using my finger or the stylus. First-time smart-phone users will appreciate this aspect.

I made calls on the Centro, pressing the phone shortcut key to get started. The keyboard’s number keys work just as they do on a Treo, but I preferred using the larger virtual buttons on the touch screen. The Centro felt like a normal cellphone in my hand and against my ear, especially compared with the clunky, rectangular Treos and BlackBerrys. The tiny Centro fit into the smallest purse I own.

An icon on the home screen marked “IM” linked me directly into a screen where I could log in to and use three instant-messaging programs simultaneously: AOL’s AIM, Yahoo Messenger and Windows Live Messenger. I jumped between IM sessions using the left and right navigation key buttons. But a faster way to do this was just by touching the screen to select a program. I also tapped the screen to select names of friends before IMing them. Again, the touch screen saved time and took out the guesswork of which key to press to navigate.

I played preloaded music on the Centro and BlackBerry Pearl; both have built-in speakers that sound remarkably good for such little devices.

Battery life on the Centro is estimated at 3.5 hours of talk time and up to 12.5 days of standby time. The Pearl 8130′s talk time is expected to fetch 3.8 hours before quitting, but its standby battery is expected to last only nine days. I didn’t perform rigorous battery tests, but found that my BlackBerry Pearl needed to be charged before my Palm Centro after a weekend of using them for roughly the same amount of time.

The BlackBerry Pearl 8130 comes with only RIM’s BlackBerry Messenger program. Both the Pearl and Centro have 64 megabytes of internal memory and the ability to expand that using microSD cards.

If you’re considering the leap from a cellphone to a smart phone but don’t want the bigger, geekier look of one of these helpful devices, the Palm Centro is a good option. Its keyboard will take some getting used to, but its touch screen will win you over by providing a simpler way to navigate — especially for smart-phone novices.

-Edited By Walter S. Mossberg

• Email mossbergsolution@wsj.com