AllThingsD » Pali Research

Palm Handsets Priced to Pwn

John Paczkowski — Tue, 04 May 2010 10:16:04 +0000

Remarking on slowing sales of the Pre in August 2009, Pali Research analyst Walter Piecyk suggested that Palm (PALM) and Sprint (S), its sole carrier partner at the time, would be wise to drop the price of the device to 99 cents and put it in the hands of as many customers as possible before it lost the little differentiated advantage it had.

Piecyk’s advice went unheeded–until recently. Now with Palm’s fate settled after its acquisition by Hewlett-Packard (HPQ) last week, the handset maker’s smartphones have become bargain-bin fare.

Last week also saw Sprint giving away the diminutive Pixi free to anyone willing to sign a two-year contract. This week, Verizon (VZ) is following suit with steep discounts of its own. The carrier has begun offering the Pre Plus and the Pixi Plus for just $29 with a new two-year contract. That’s $120 less and $60 less than the prices at which the devices debuted in January.

It’s also $28.99 more than Amazon’s price.

That’s right, the next-generation versions of the phone former Palm CEO Ed Colligan once described as a “significantly better product” deserving of a higher price than Apple’s (AAPL) iPhone is selling for a penny at Amazon (AMZN). Which is a great deal, particularly since both devices are being offered with free 3G Mobile Hotspot service. Sadly, the offer comes a bit too late to make much of a difference for Palm.

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Warner and Redbox Settle Up; Consumers Will Wait to Watch

Peter Kafka — Tue, 16 Feb 2010 21:19:29 +0000

Redbox, which looked like a major problem for Hollywood a few months ago, may be a little more palatable after all.

The movie studios have worried that Redbox’s $1-a-day rental model, which now accounts for nearly one out every $5 spent on DVDs, undercut every other revenue stream they had. But several big studios–including Sony (SNE), Lionsgate (LGF), Disney (DIS) and Paramount, a unit of Viacom (VIA)–have figured out how to live the company.

Meanwhile, three others–Time Warner’s (TWX) Warner Bros., News Corp.’s (NWS) 20th Century Fox and GE’s (GE) NBC Universal–have been fighting Redbox in court.

Make that two others. Warner Bros. just announced a settlement with Redbox. And given Warner’s size and clout, you have to wonder how much longer the two other studios will need to keep fighting.

This settlement looks an awful lot like the one that Warner and Netflix agreed to earlier this year. Which is to say: Warner got pretty much what it wanted–protection of its 28-day DVD sales “window”–and the other side argues that it’s okay, really.

The theory is that by giving up the ability to get movies to consumers right away, Redbox saves money on the DVDs it does get and will have access to a wider selection. Redbox also says this will help the company if its wants to get into digital distribution. Though unlike Netflix (NFLX), Redbox is a long away from being a plausible player in digital.

But make no mistake. This is a costly window and one that Redbox wouldn’t agree to unless the studios had regained the upper hand. From Pali Research’s Rich Greenfield, via a clairvoyant note (title: “It’s Not Easy Being Redbox, with 2010 Set to Get Even More Challenging; Provides Hope For Movie Biz”):

While Redbox management declined to answer a question related to whether there business would be impacted by 10% from a 30-day window (that Redbox agreed to and stopped pursuing workarounds), we believe 10% is far too low. Redbox relies on the new-release business, if it did not, it would not be suing three studios. We suspect the impact is closer to 35-50% than 10% (albeit Redbox’s cost per DVD would come down), particularly as once a window is established the studios will spend heavily to hammer home to consumers that movies are available other places before Redbox (which generate higher gross profit dollars to the studio per transaction than via Redbox).

Release:

WARNER BROS. HOME ENTERTAINMENT AND REDBOX ANNOUNCE A MULTI-YEAR DISTRIBUTION AGREEMENT

Companies Agree to 28-Day Window for DVD and Blu-ray Titles

BURBANK, Calif. And OAKBROOK TERRACE, Ill, February 16, 2010 – Warner Bros. Home Entertainment Group and redbox today announced a new multi-year distribution agreement that will make Warner Bros. new release DVD and Blu-ray titles available to redbox customers after a 28-day window. The agreement also marks the end of the lawsuit that redbox filed against Warner Home Video in August 2009.

“We are very pleased to have had the opportunity to sit down with redbox and negotiate an arrangement that benefits both parties and allows us to continue making our films available to redbox customers,” said Kevin Tsujihara, president, Warner Bros. Home Entertainment Group. “The 28-day window enables us to get the most from the sales potential of our titles and maximize VOD usage.”

The new arrangement provides redbox with reduced product costs, sufficient quantities of product and optimal stock levels four weeks after street date as well as extends redbox’s access to Blu-ray titles, which redbox is currently testing in select markets. The agreement also provides Warner Bros. the opportunity to maximize the sales of new release titles as well as video on demand and other forms of digital distribution.

“This agreement enables redbox to fulfill our commitment to providing consumers affordable and convenient home entertainment,” said Mitch Lowe, president, redbox. “By agreeing to a delayed release date, redbox can now acquire Warner Home Video titles at a reduced product cost, preserving value for our consumers and increasing customer access to Warner titles at redbox locations nationwide.”

Warner Home Video and redbox will be implementing delayed availability during the month of March and will reach a four-week window by March 23 with the release of The Blind Side. The new agreement will run through January 31, 2012. Redbox has also agreed to destroy Warner Home Video content following its lifespan in kiosks.

“The 28-day window for redbox balances the economics of our relationship while continuing to offer great value to their customers,” said Ron Sanders, president, Warner Home Video. “This accord establishes a mutually beneficial relationship that will foster an ongoing and productive partnership.”

Warner Bros. is currently a leader in many home video categories including total video (DVD and Blu-ray combined), Theatrical Catalog video, TV on DVD, and Blu-ray and will ensure the DVD rental company access to sufficient quantities of Warner Home Video titles including The Time Traveler’s Wife, The Box, The Informant!, Where the Wild Things Are, The Blind Side, and Sherlock Holmes.

Verizon Wireless: 30 Percent Cut to Voice, 50 Percent Increase to Data

John Paczkowski — Fri, 15 Jan 2010 13:30:44 +0000

As expected, Verizon Wireless rolled out some new wireless pricing plans this morning, promising “simple, affordable convenience.” And the carrier does provide that if you’re a feature phone user with little need for a data package. Or an AT&T customer.

Verizon (VZ) dropped its nationwide unlimited voice plan to $69.99 a month from $99 and began offering a nationwide unlimited voice and text plan for $89.99.

But if you’d like a data plan to go along with them, you’ll be looking at additional fees–$9.99 for a 25-megabyte package and $29.99 for an “unlimited” one. The $19.99 data package option for 3G multimedia phones has been discontinued.

So what Verizon has really done here is cut the price of voice and raise, substantially, the price of data, as Pali Research analyst Walter Piecyk pointed out in a research note to clients this morning.

“This is 30 percent cut to voice and a 50% increase to data which effectively results in about an 8-10% effective cut to the more popular high-end rate plans,” the analyst explained.

“The rate moves appear to be trying to increase the perceived relative value of data,” Piecyk added. “There is in effect a price increase for data to $30 from $20, a level that most carriers have charged. Increasing prices is not a logical way to drive adoption but Verizon mitigates that increase with steep cuts in voice and appears to be using its industry leading position to move the perception on the value of data.”

One last point worth making here: Verizon’s new plans are more expensive than those offered by Sprint Nextel (S) and T-Mobile, but cheaper than AT&T’s–at the moment, anyway. The last time Verizon lowered its plan prices, AT&T (T) followed suit within a matter of hours.

The plans go into effect Monday, Jan. 18.

Below, some comparative tables on Verizon’s new pricing plans, courtesy of Pali (click to enlarge), and the official announcement:

VERIZON WIRELESS OFFERS SIMPLE, AFFORDABLE CONVENIENCE WITH NEW UNLIMITED VOICE PLANS
New Nationwide Plan Options Include Unlimited Talk and Text to Pair with Robust Data Plans on the Latest 3G Phones

BASKING RIDGE, N.J. – New monthly service plans from Verizon Wireless make connecting to the nation’s most reliable wireless network easier than ever. Beginning Jan. 18, customers may sign up for a new Nationwide Unlimited Talk plan that allows customers to call anyone in the United States for $69.99 monthly access or a Nationwide Unlimited Talk & Text plan to call and send text, picture and video messages to anyone in the country for $89.99 monthly access.

Nationwide Family SharePlans® will also have new unlimited options. Nationwide Unlimited Talk Family SharePlans will be $119.99 monthly access while the Nationwide Unlimited Talk & Text Family SharePlans will be $149.99 monthly access. All Family SharePlan pricing includes the first two lines of service. Standard text message rates will apply for customers on the Nationwide Unlimited Talk plans who do not sign up for a text messaging bundle.

Data Packages

The company also announced the expansion of the 25 megabyte for $9.99 per month data package requirement to include all Verizon Wireless 3G Multimedia phones, which gives customers quick access to Mobile E-mail, games and the Internet. The data package requirement was introduced last year with the LG enV® TOUCH and the Samsung Rogue™. Today’s announcement expands that list to include new activations of the LG Chocolate Touch™, LG enV®3, LG VX8360, Motorola Entice™ W766, Nokia 7705 Twist™ and Samsung Alias™ 2. The company expects to introduce a host of 3G Multimedia phones in 2010. The $19.99 data package option for 3G Multimedia phones has been discontinued.

Customers using Simple Feature phones (Mobile Web-enabled) will continue to pay $1.99 per megabyte or choose either the $9.99 or $29.99 data packages. The consumer data package for 3G Smartphones such as BlackBerry®, Windows Mobile® or Android devices will remain at $29.99 per month.

Prepaid Plans

Verizon Wireless will also offer customers new prepaid plans beginning Jan. 18. For those who prefer pay-as-you-go options, but want a no-holds approach to calling and texting, new Monthly Unlimited Prepaid plans will give customers the same great calling options as monthly contract subscribers for just $5 more per month. Prepaid Monthly Unlimited Talk is now available for $74.99 per month while contract subscribers pay $69.99 for the same unlimited calling option. Prepaid Monthly Unlimited Talk & Text will be available for $94.99 per month. The 450- and 900-minute Monthly Prepaid plans will also be available for $5 more per month than comparable postpaid plans.

Existing Customers

Today’s announcement will not have an impact on existing customer contracts, although customers may choose to move to any of the new plans. The company allows customers to change their service plans at any time without penalty or contract extension. To move to the newly announced plans, customers may go online to their My Verizon accounts at www.verizonwireless.com or contact Customer Service at 1-800-922-0204.

Sprint Undervalued by as Much as 50 Percent? Keep Dreaming…

John Paczkowski — Tue, 08 Dec 2009 17:05:38 +0000

If Sprint, as Barron’s recently claimed, deserves more respect on Wall Street, it’s not going to find it at Pali Research, which clearly does not see the same 50 percent upside potential in the company’s shares.

In a note to investors this morning, Pali analyst Walter Piecyk says he’s not buying predictions about Sprint (S) returning to growth in 2010. Sure, the company is improving post-paid subscriber losses, says Piecyk, but not as quickly as it needs to. And its prepaid business, which already faces a fair bit of competition, will be confronted with even more competition next year.

“Over the past six months our concerns have been rising over the slow pace of change at Sprint and what we view as lost opportunities for growth, but we maintained our Buy rating due to the low valuation on the stock and the depressed expectations of investors,” Piecyk writes.

“Those concerns increased in recent months as the pre-paid business, which Sprint has been accessing for growth, became more competitive and Verizon began executing on a more open device strategy,” the analyst adds. “In the past few weeks, investors have become more optimistic about positive post-paid signs early in Q4 and Sprint’s prospects of even stronger pre-paid results in 2010, in the face of increasing competition.”

In contrast, Piecyk notes that “We are less confident about those trends and as we model out a more competitive market in 2010 for all our companies it becomes evident to us that Sprint will be challenged to stabilize EBITDA. Faced with negative catalysts in the months ahead and the challenge of appropriately valuing a company whose EBITDA is in perpetual decline, we believe now is the right time to downgrade the stock to Neutral.”

Wall Street, then, isn’t underestimating Sprint’s prospects for 2010. It’s overestimating them–or at least it certainly was yesterday.

“For 2010, we expect post-paid losses to be pared by 35% to 2.3 million subs lost compared to our prior estimate of less than 2 million subs lost in that year,” Piecyk concludes. “While pre-paid net adds might offset the losses or even top post-paid losses in Q4 we expect the total customer base to decline by 700,000 in 2010.”

When Will Warner Music Group Finally Buy EMI?

Peter Kafka — Tue, 17 Nov 2009 15:18:39 +0000

Are Warner Music Group and EMI, which have been circling each other for nearly a decade, finally ready to consummate their relationship?

That’s the obvious question in light of news that both Terra Firma, the private equity group that bought EMI in 2007, and Citigroup, which funded most of the transaction, have written down most of their investments in the music company.

This isn’t a surprise–the move has been a long time coming–but it does open the door for Warner, which restructured its debt with an eye toward making such a deal earlier this year.

Pali Research’s Rich Greenfield thinks that Citi (C) will push to break up EMI and sell Warner (WMG) the record music group, which tends to lose money, and keep the music publishing business, which has been a reliable money maker, even during the industry’s 10-year freefall.

But at this point, I don’t know why Warner couldn’t try to swallow the whole thing. In the past, that deal would have been scuttled due to antitrust issues (and in fact, it was), but the music industry is a different beast right now–a sick beast–and I think regulators would be a lot more forgiving this time around.

[Image credit: beggs]

AT&T Earnings Expected to Be Better Than Expected

John Paczkowski — Wed, 21 Oct 2009 12:01:45 +0000

AT&T reports third-quarter earnings Thursday and by most accounts, they should be strong enough, thanks to the sheer size of the company’s footprint and, of course, its exclusive carrier rights to the iPhone. Apple said Monday that it sold more than 7.4 million iPhones in the quarter, half a million more than in same quarter a year ago.

Now, that figure includes sales made abroad, so we don’t yet know how many were sold by AT&T (T), but it’s clear that the number was substantial. In its third quarter last year, AT&T activated 2.4 million iPhones and 40 percent of those were for subscribers who switched from other carriers. So the fact that Apple (AAPL) sold as many iPhones as it did in the company’s most recent quarter, bodes well for the carrier.

As Craig Moffett over at Bernstein Research notes, “It is entirely conceivable that AT&T’s iPhone alone will account for more than 100 percent of the entire industry’s post-paid subscriber growth in the third quarter.”

But therein lies the rub. For while sales of Apple’s handset remain strong, the heavy subsidies it requires have pushed AT&T’s wireless margins down. And the heavy data traffic associated with the handset have led to widespread complaints about AT&T’s network, forcing infrastructure upgrades. Worse, AT&T’s dependence on iPhone exclusivity at a time when Apple is clearly transitioning away from such a model leaves it quite vulnerable.

“While the strong sales of the iPhone are positive for AT&T in the near term, they increase the company’s reliance on a product for which we do not believe it will be able to maintain exclusivity,” Pali Research analyst Walter Piecyk wrote in a note to clients Tuesday. “We believe more than one third of AT&T’s post paid customer base is tied to an iPhone user and that mix is likely to rise significantly over the next few quarters.”

But not this quarter. This quarter, AT&T is expected to add 1.5 million to 1.7 million net wireless customers, driven by demand for the iPhone 3GS, which was released early on in the quarter. And while another drop in wireline customers is likely to weigh on results, it will be tempered once again by the iPhone. AT&T is expected to earn 50 cents a share, compared to 55 cents in the year-earlier third quarter, according to analysts polled by Thomson Reuters, who see revenue falling to $30.9 billion from $31.3 billion.

AT&T Earnings Expected to Be Better Than Expected

John Paczkowski — Wed, 21 Oct 2009 12:01:45 +0000

New from Sprint: The $99 Palm Pre [UPDATED]

John Paczkowski — Tue, 08 Sep 2009 17:02:26 +0000

UPDATE:Well, that was fast. Sprint has cancelled the offer.

Sprint effectively lowered the price of the Palm Pre today to $99 for new customers only, offering a $100 service credit to those who port their numbers over from another carrier. To be eligible for the promotion, first noted by Pali Research, customers must purchase the Pre along with a two-year service agreement and abandon their current carriers. Agree to that and Sprint will apply a $100 credit to your monthly bill over a three-month period.

The offer, which begins today and runs through Oct. 10 (or Oct. 31, depending on which page of Sprint’s site you’re looking at), should goose sales, if only a bit–assuming Sprint (S) advertises the Palm (PALM) Pre offering.

“We believe sales of the Pre have been fairly stable over the past month but a price cut to $99 should stimulate sales into the end of Q3, as it would for any popular phone,” Pali Research analyst Walter Piecyk told Digital Daily. “Operators have been getting more aggressive on phone subsidies in Q3, which is likely a reflection of the maturity of the wireless industry in the United States, which is at 90 percent penetration.” (Click on image below to enlarge.)

UPDATE: Here’s the official explanation from Sprint, which seems to have resolved its internal confusion over the offer’s expiration date.

“Starting today, customers can get a $100 service credit when they move their number from another wireless carrier to a Palm Pre from Sprint and activate a new line of service with a two-year agreement. The $100 service credit will be applied to the customer’s Sprint bill within three invoices. This offer is available in to consumers and individual-liable business customers in all channels except WalMart. The offer expires Oct. 10, 2009.”

UPDATE: Sprint has cancelled the offer. You’ll find further details, here.

Streaming Video Better on Pre Than on iPhone?

John Paczkowski — Fri, 04 Sep 2009 15:10:28 +0000

Though it got off to a slow start, Palm’s App Catalog is slowly evolving into the ecosystem for which the company had hoped. It recently surpassed four million downloads and is poised for a bit of a growth spurt now that more applications have begun to appear on its virtual shelves. Indeed, in the last week, the number of applications available for the Pre increased by 40 percent to 58.

Now, that’s still a trifling number when compared to the 50,000 or so available in Apple’s (AAPL) iTunes App Store, but it’s something, and it shows that Palm (PALM) is managing to convince iPhone-addled developers that writing WebOS applications will be lucrative business.

Among the latest and most promising of those new apps, DirecTV’s (DTV) NFL Sunday Ticket. Though the app–which allows users to watch NFL games on their cellphones–is available for the iPhone as well as for the Pre, it may offer a better experience on the latter, as Pali Research analyst Walter Piecyk notes in a research alert this morning.

“We will be interested to see how this application performs on Sprint’s (S) network compared to how it will perform on the iPhone on AT&T’s (T) network,” Piecyk writes. “Sprint is more likely to allow a less compressed stream and therefore higher quality video on its network as we have seen with Sprint’s implementation of YouTube, which is much higher quality than viewing YouTube clips on the iPhone over the AT&T network. When the iPhone is forced to WiFi, the quality of the YouTube clips improves to the level we experience on the Palm Pre but that kind of defeats the purpose of the mobile internet.”

An interesting point and an interesting potential selling point for Palm and Sprint–especially given the beating AT&T’s network has been taking in the media lately.

Apple to End AT&T iPhone Exclusivity Within a Year?

John Paczkowski — Mon, 31 Aug 2009 15:21:01 +0000

Another point worth pulling out from Piper Jaffray analyst Gene Munster’s recent research note about Apple, this one regarding AT&T’s iPhone-exclusivity deal: Munster doesn’t see it lasting much beyond this year. Apple (AAPL) is slowly transitioning the countries in which it sells the iPhone to a multicarrier model and the United States is at the top of its list.

“We expect Apple to add new iPhone carriers in the U.S. within the next year (likely with a new product launch next summer), Munster writes. “By way of example, for various reasons the company moved from an exclusive relationship with French wireless carrier Orange to a multi-carrier model. In France, the company now enjoys dramatically higher market share (in the 40% range vs. about 15% in ROW) than in countries with exclusive carrier agreements (such as AT&T in the U.S. where the iPhone has market share in the mid-teens). We believe Apple is seeing the increased unit sell-through more than offset the slightly (~10%) deteriorated economics per unit involved in non-exclusive agreements.”

If Munster’s prediction proves true, it will undoubtedly be welcomed by iPhone owners–nearly a third of whom listed AT&T as the feature they dislike most in the iPhone in a recent ChangeWave survey. But it will be ugly news for AT&T (T), which could suffer some serious subscriber defections if the company loses its iPhone-exclusivity deal–particularly if Apple signs on Verizon (VZ) as a second carrier. As Pali Research recently noted:

“As the iPhone exclusivity period rolls off between AT&T Wireless and Apple, a material number of AT&T customers will flock to Verizon’s superior network. We estimate that nearly a third of AT&T’s post-paid customers are being retained by AT&T primarily because of the iPhone exclusivity.”

Apple to End AT&T iPhone Exclusivity Within a Year?

John Paczkowski — Mon, 31 Aug 2009 15:21:01 +0000

“As the iPhone exclusivity period rolls off between AT&T Wireless and Apple, a material number of AT&T customers will flock to Verizon’s superior network. We estimate that nearly a third of AT&T’s post-paid customers are being retained by AT&T primarily because of the iPhone exclusivity.”

Analyst to Sprint: You'd Sell More Pres if They Cost 99 Cents

John Paczkowski — Wed, 26 Aug 2009 15:45:38 +0000

A renewed advertising push for the Palm (PALM) Pre and an increase in the number of applications available for it haven’t done much for the device’s sales. According to Pali Research analyst Walter Piecyk, weekly Pre sales are holding steady in the mid-20,000 range at which they stabilized a few weeks back.

“Advertising for the product has increased with a more direct attack on the iPhone but that does not appear to have materially impacted sales from its prior sales levels,” Piecyk writes in a note to clients today. “The Pre continues to add applications that will increase the appeal of the phones like Spades and Bubbles, two game applications and total application downloads have now topped 3 million.

“However,” Piecyk adds, “with only 41 apps available we wonder how apps with limited appeal like Shabat Shalom, which allow users to check candle lighting times, are showing up before proven iPhone successes like a basic fart sound application or Facebook.”

Piecyk goes on to suggest that Sprint (S) needs to step up its efforts to market the Pre lest it fumble the best opportunity to come its way in a while.

“Overall the launch of the Pre has been a success for Sprint by increasing the profile of the company’s data network and its use as an effective retention tool. However, we expect Verizon to heavily market whatever WebOS phone they get their hands on.

“This is a good operating system,” Piecyk notes, “and phone and the multi-tasking functionality is a clear differentiated advantage but competitive advantages in technology are fleeting and we cant imagine that Apple and others will not be able to replicate the multi-tasking functionality in short order. Between Verizon’s launch of a Palm product in 2010 and the inevitable end of the multi-tasking differentiation we believe Sprint is wasting a valuable opportunity to get the Pre in as many customers’ hands as possible this year.”

And just how should Sprint maximize that opportunity? Simple, says Piecyk: Slash the Pre’s price to $99, or even 99 cents.

Analyst to Sprint: You'd Sell More Pres if They Cost 99 Cents

John Paczkowski — Wed, 26 Aug 2009 15:45:38 +0000

Piecyk goes on to suggest that Sprint (S) needs to step up its efforts to market the Pre lest it fumble the best opportunity to come its way in a while.

And just how should Sprint maximize that opportunity? Simple, says Piecyk: Slash the Pre’s price to $99, or even 99 cents.

McNamee’s Elevation Partners Henceforth Known as Exaggeration Partners

John Paczkowski — Thu, 30 Jul 2009 16:17:53 +0000

“June 29, 2009, is the two-year anniversary of the first shipment of the iPhone. Not one of those people will still be using an iPhone a month later.”

– Palm investor Roger McNamee, March 6, 2009

“The statement…that ‘not one’ person who bought an Apple, Inc. iPhone on the first shipment date ‘will still be using an iPhone a month’ after the two-year anniversary of that day is an exaggerated prediction of consumer behavior pattern and is withdrawn.”

– Palm Free Writing Prospectus, March 9, 2009

Good thing Palm withdrew investor Roger McNamee’s your-next-iPhone-will-be-a-Pre claim because there obviously wasn’t much truth to it. If there was, well, there would have been a massive rush on Pres nationwide this past month. And that clearly didn’t happen.

In fact, by all indications, the Pre hasn’t even come close to performing as well at market as McNamee promised. Though it was the most successful handset launch in Sprint’s history, it didn’t come close to supplanting the Apple (AAPL) iPhone. Hell, it couldn’t even stop Sprint from losing 991,000 subscribers during the second quarter of 2009.

Which is not to say that the Pre and what it’s done for Palm (PALM) aren’t remarkable. Any device capable of transforming a $423 million market cap into a $2.9 billion one in 12 months is nothing short of a miracle, as I’ve noted before. Seriously, check out the chart below.

It’s just that McNamee was, and is, as full of it as a beef ranch manure truck. Because at a run rate of roughly 25,000 per week (according to the latest stats from Pali Research), Pre sales are decent. Nothing more, nothing less.

Consider this: In its first quarter, 8.6 percent of Sprint’s (S) 35.4 million post-paid subscribers upgraded handsets. In its latest quarter approximately nine percent of the company’s 34.4 million post-paid subs upgraded. So despite all the hoopla over the Pre, just 15,000 to 50,000 more Sprint users upgraded their handsets this quarter than last quarter, a period with no important handset launches.

Given Sprint’s substantial base of Palm handset owners, that’s not exactly impressive. Makes you wonder if that “accidental” price cut we saw at Best Buy (BBY) earlier this week might become an official one before the end of summer.

Below, McNamee pokes fun at himself in the video introduction to his D7 appearance:

[ See post to watch video ]

Pre Sales May Be Slowing. Yes? Nooooooooo!

John Paczkowski — Fri, 24 Jul 2009 22:23:15 +0000

Now this is just getting silly.

Pali Research says sales of the Palm Pre are slowing. RBC’s Mike Abramsky says they aren’t and claims 325,000 to 375,000 have been sold to date, ahead of his expectations.

Citing some decidedly unscientific poll data, Jesup and Lamont analyst Kevin Dede suggests the device is plagued by build-quality issues and a high exchange/return rate, potentially 40 percent. Abramsky says it’s between two and three percent and calls BS on the build-quality issue.

“Most buyers appear delighted with their new Pre user experience,” Abramsky said in a research note Friday. “Pre satisfaction appears higher than legacy Palm devices (e.g., Treo), affirming improved execution from the ‘New’ Palm, including engineering, manufacturing, quality and process improvements.”

So, Pre sales are slowing. Or, they’re not.

And exchange/return rates are high.

Unless they’re not.

And these analysts are on point.

Unless, of course, they’re not. Too bad it’s impossible to tell without official numbers from Palm (PALM) or Sprint (S).

Palm Pre Customers Apparently as Constrained as Palm Pre Supply [Updated]

John Paczkowski — Fri, 24 Jul 2009 17:40:46 +0000

“We still have a backlog of subscribers but it’s not unmanageable and we get shipments every week. We’ll be short for a while but we’re catching up.”

– Sprint Nextel CFO Bob Brust, June 24, 2009

[This post was updated at 12:36 with comment from Sprint.]

Sprint best step up its marketing efforts for the Pre because according to Pali Research, demand for Palm’s new device is slowing, and quickly.

During the week ending June 26, Pali estimates that Sprint sold 50,000-60,000 Pre handsets. In the weeks that followed, Sprint sold “less than 40,000,” and then, “over 30,000”–again, according to Pali. Now the research outfit says Pre sales have declined by another 5,000 units.

“We really aren’t sure what Sprint is waiting for in stepping up the ad campaign but Palm Pre sales have continued to slow over the past two weeks and we believe Sprint is currently selling roughly 25,000 per week, down from over 30,000 two weeks ago and over 50,000 in late June,” Pali analyst Walter Piecyk said in a research note this morning. “Advertising could increase in the coming weeks but we are headed into August and there is a new BlackBerry now vying for the attention of wireless customers.”

And don’t forget that $99 Apple iPhone 3G.

Piecyk concludes by suggesting that Sprint (S), by failing to market the hell out of the Pre, is fumbling the best opportunity to come its way in a while.

“Slowing sales cannot be helping CEO Dan Hesse’s ability to extend the exclusive period for the Pre as Palm (PALM) likely views a Verizon launch as something that could materially stimulate sales,” Piecyk said.

“Hesse has never been one to resort to price cuts but we wonder if dropping the Pre to $99 could reignite sales,” the analyst continued. “…Sprint’s future is certainly not tied to the Pre but this is a great product that could highlight their data network. We believe they are squandering this opportunity over the past few weeks. Sprint is still not in a strong enough position to let good opportunities pass them by.”

And what does Sprint think of that assessment? Not much. Reached for comment, a spokesperson told me: “we are very pleased with the performance of the Pre and the excitement it’s drawn; we are selling all the quantities that are being delivered to us and we are ramping up advertising this month — did you see the full-page ads this week comparing the value and performance of the Pre to the iPhone? — and we are expanding availability of the handset at Best Buy, Radio Shack and online, with future expansion of availability planned. As Dan Hesse noted in California today, it takes a number of months — through a whole ramped-up sales cycle — to determine the real performance of a handset in the marketplace. Folks like to speculate and toss around ideas on the internet all the time, but the truth is Sprint is very happy with how the Pre is doing.”

AT&T: Thank God for Vitamin i

John Paczkowski — Thu, 23 Jul 2009 13:22:15 +0000

Reporting better-than-expected second-quarter earnings this morning, AT&T said it activated 2.4 million iPhone accounts–35 percent of them for new customers. And it saw its wireless data revenue rise 37.2 percent to $3.4 billion and subscriber churn fall to 1.09 percent, a record low.

Clearly, the debut of the iPhone 3GS and Apple’s decision to cut the price of the low-end iPhone to $99 had an enormous impact on AT&T’s bottom line. “AT&T iPhone subscribers, both new customers and upgrades, take two-year contracts with data packages,” the company said. “As a result, robust iPhone demand drives strong recurring revenues and substantial long-term value.”

Litter wonder, then, AT&T (T) is said to be doing it all it can to renew its iPhone exclusivity deal. The company is clearly dependent on the device for some of its most recent gains.

In fact, Commresearch analyst Gregory Lundberg says that were the iPhone to be excluded from the company’s latest financials, 25 percent fewer people would have signed up for its service in the second quarter than in the first. So if it’s true that Verizon (VZ) is in talks with Apple (AAPL) about adding the iPhone to its product lineup, AT&T has a lot to worry about, indeed.

As Pali Research recently noted, “As the iPhone exclusivity period rolls off between AT&T Wireless and Apple, a material number of AT&T customers will flock to Verizon’s superior network. We estimate that nearly a third of AT&T’s post-paid customers are being retained by AT&T primarily because of the iPhone exclusivity.”

AT&T: Thank God for Vitamin i

John Paczkowski — Thu, 23 Jul 2009 13:22:15 +0000

Litter wonder, then, AT&T (T) is said to be doing it all it can to renew its iPhone exclusivity deal. The company is clearly dependent on the device for some of its most recent gains.

IBM Shrugs Off Econalypse

John Paczkowski — Fri, 17 Jul 2009 17:00:32 +0000

[ See post to watch video ]

Analyst: AT&T Screwed Without iPhone Exclusivity

John Paczkowski — Fri, 17 Jul 2009 14:40:25 +0000

There’s no question that AT&T’s iPhone-exclusivity deal has been a strategic coup for the carrier. Since its debut in 2007, the device has drawn millions of new customers to the company and done much to revitalize its brand. But the carrier’s deal with Apple (AAPL) won’t last forever, and as soon as it expires, the telecommunications giant will face slowing growth and worse, defections.

So says Pali Research, which in a research note this week argued that AT&T (T) should be very worried about the prospect of Verizon adding the iPhone to its handset lineup.

“As the iPhone exclusivity period rolls off between AT&T Wireless and Apple, a material number of AT&T customers will flock to Verizon’s superior network,” the firm states. “We estimate that nearly a third of AT&T’s post-paid customers are being retained by AT&T primarily because of the iPhone exclusivity.”

An unsettling thought for AT&T, whose five-year agreement to be the iPhone’s sole U.S. provider is reportedly set to expire in 2010. Especially since there are several compelling reasons for Apple to offer the iPhone to Verizon (VZ).

For one thing, the move would give Apple access to about 80 million new Verizon customers. For another, it would bring the iconic device to a carrier that might, you know, reasonably support all its features, a carrier whose LTE “4G” network isn’t four-to-five years off, a carrier whose name doesn’t elicit laughter and jeers at Apple’s Worldwide Developers Conference.

So why extend AT&T’s exclusive deal? If there’s a good reason, Pali doesn’t see it. The research house is betting on the iPhone coming to Verizon. And when it does…

“We expect AT&T Wireless net subscriber additions to fall to less than 1 million in 2010 from more than 4 million in 2008. With an LTE-based iPhone in 2011, we believe Verizon could take even more market share resulting in a contraction in AT&T’s subscriber base in that year.”

Analyst: AT&T Screwed Without iPhone Exclusivity

John Paczkowski — Fri, 17 Jul 2009 14:40:25 +0000

So says Pali Research, which in a research note this week argued that AT&T (T) should be very worried about the prospect of Verizon adding the iPhone to its handset lineup.

So why extend AT&T’s exclusive deal? If there’s a good reason, Pali doesn’t see it. The research house is betting on the iPhone coming to Verizon. And when it does…

Slowing Palm Pre Sales Actually Not Slowing

John Paczkowski — Fri, 10 Jul 2009 18:46:56 +0000

Are sales of the Pre slowing or not? Without official numbers from Palm or Sprint, it’s nearly impossible to tell. But that hasn’t stopped analysts from taking a stab at it. Earlier this week, Pali Research analyst Walter Piecyk issued a research note claiming channel checks show a gradual tapering off of Pre sales, from an estimated 50,000-60,000 units sold the week ending June 26 to just over 30,000 last week.

Today brings another Palm-related research note, this one from Pacific Crest analyst James Faucette. He claims that Pre sales are “robust.” According to Faucette’s channel checks, Palm is selling about 40,000 Pres per week, a “normalized” sell-through rate that he says will continue through August.

So who’s right? Piecyk or Faucette? Who knows? Until Palm (PALM) and Sprint (S) go on record with real sales metrics, we’ll have to use our imaginations. Which is pretty much what all these analysts appear to be doing right now, anyway. Honestly, they might as well be issuing research notes on jelly bean jar guessing games.

Oh, and for what it’s worth, Palm and Sprint are not willing to release sales numbers right now. Reached for comment, Sprint told me, “We’re excited by the response to Palm Pre. Demand continues to be strong, and we are working closely with our partners at Palm to meet the needs of every customer as quickly as possible.” And Palm told me me to call Sprint…

Pre Sales Slow Again

John Paczkowski — Thu, 09 Jul 2009 16:30:53 +0000

Post-Pre launch, Palm may be, in the words of CEO Jon Rubinstein, “exactly where we hoped we would be.” But how long Palm (PALM) will stay there is an open question. Because according to Pali Research, Pre sales are clearly slowing.

“We estimate that sales of the Palm Pre slowed again over the past week compared to the prior week but likely remain over 30,000 compared to less than 40,000 in the prior week and our estimate of 50,000-60,000 in the week ending June 26th,” Pali analyst Walter Piecyk said in a research note this morning.

Now, to be fair, the holiday weekend may have negatively affected sales. And another report from Piper Jaffray suggests that the Pre is cutting into sales of RIM’s Blackberry. So there’s that. Still, if Pali’s estimates are correct, it’s pretty clear that demand is tapering off a bit.

Perhaps it’s time to ramp up the Pre’s marketing. Problem is, marketing costs money and Palm doesn’t have very much of that right now.

And for You, Mr. McNamee? Ah, Yes–The Boiled Crow Sandwich.

John Paczkowski — Thu, 02 Jul 2009 19:01:40 +0000

“You know the beautiful thing: June 29, 2009, is the two-year anniversary of the first shipment of the iPhone. Not one of those people will still be using an iPhone a month later.”

– Palm investor Roger McNamee

Palm (PALM) seems to have satiated pent-up early demand for its new Pre smartphone, constrained supplies be damned. In a pair of investor notes issued today, analysts at Pali Research and JP Morgan say that sales of the Pre have tapered off to a point where supply and demand are roughly in parity.

“We have concluded our 3rd round of channel checks for the Pre,” writes JP Morgan analyst Paul Coster, who notes that demand for the handset is hovering at about 40,000 per week. “The gap between supply and demand has closed at Sprint and BestBuy stores, waitlists are eliminated or down, and most stores now have Pre devices in stock.”

Pali Research analyst Walter Piecyk also surveyed the Pre landscape and reached a similar conclusion, though he sees the slowing of sales as a bit more pronounced. “We believe that Palm Pre sales have slowed over the past week for Sprint to under 40,000 from 50,000-60,000 last week,” he writes. “…We suspect that if sales continue to moderate, Sprint would increase its marketing budget for the product. The marketing budget behind the product has been somewhat limited to date compared to the marketing push that Apple does.”

Indeed. And let’s not forget that Apple (AAPL) has a new handset on the market that’s been selling quite well. Makes you wonder if this ebb in demand for the Pre is somehow related.

Guess it’s looking like Palm investor Roger McNamee’s hyperbolic predictions about iPhone-to-Pre conversion aren’t going to quite pan out.

Video Faceoff! New iPhone vs. Old iPhone vs. Palm Pre.

Peter Kafka — Fri, 19 Jun 2009 20:43:35 +0000

Still waiting to get your hands on the new Apple (AAPL) iPhone 3G S? Here’s something that should occupy you for a few minutes while you wait: A side-by-side-by-side-by-side comparison of four iterations of iPhones going through various speed tests, performed by Pali Research analyst Walt Piecyk.

One unexpected result from the test Piecyk’s tests suggest that older iPhones running on the new iPhone operating system may actually be a bit slower. And yes, I checked with Piecyk–the tests were performed using AT&T (T)’s network, with Wi-Fi turned off, in midtown Manhattan.

But wait! That’s not all! Piecyk also puts the Palm Pre through its paces against the new iPhone and says (pretty hard to tell on this clip) that the Palm (PALM) phone offers a better version of clips from Google’s (GOOG) YouTube. Piecyk’s thesis: Sprint (S) is sending a less compressed version of the YouTube files to the Pre then AT&T sends to the iPhone.