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Palm to announce European carrier on July 7, O2 tipped

By CAROLINE GABRIEL

Published: 2 July, 2009

READ MORE: O2 | Palm | Europe

Palm loves to play a waiting game but it is finally set to announce a European carrier partner for its new Pre, with a press conference scheduled for Tuesday. The rumor mill is confident that, after negotiations with several multinational cellcos, the company has signed with Telefonica O2, a deal that has been widely expected, and could provide O2 UK with a back-up option if it loses its iPhone exclusive next year.

There are still some bets on Vodafone but most informed analysts believe its Spanish rival has scooped the deal for its markets in Spain, the UK and Ireland. Potentially, this could also signal an entry for the Pre into Latin America, where Telefonica is dominant in many countries. In Europe, Telefonica is expected to have a six-month headstart for the GSM/W-CDMA version of the Pre, as Sprint has had in the US for the CDMA unit.

This would give O2 UK something else to offer alongside its iPhone - though it has sold out of the new 3GS, citing "phenomenal demand", it is increasingly criticized for a shortage of other smartphone choices, and if the Apple deal ends next year, it will need to have other weapons in its armory. Of course, its supposed Pre exclusive will have ended by then, but it might have put O2 in a good position to launch future Palm webOS models. However, its challenge will be coming up with sufficient marketing and subsidy budget to put real momentum behind the Pre, when so many of its resources have been spent on meeting its iPhone targets.

The Pre would be expected to launch with similar deals to those of the iPhone or, at Vodafone, the BlackBerry Storm (free with two-year contracts of £40 a month or so). It will be in a more competitive market than in the US - Palm has a less visible brand in Europe than north America and, of course, Nokia is in play in the region, with the N Series and E Series, as is Sony Ericsson.

Over in its homeland, Palm is performing respectably, according to estimates of its first month of sales. Charter Equity Research analyst Edward Synder wrote in a recent research note that he believes Palm sold 300,000 Pre units between June 6 and month end - though many other analysts have come up with lower figures. Synder thinks Palm could sell a million units via Sprint in its first quarter, and is also looking for Verizon Wireless to launch a webOS device early next year.

Takeover speculation continues to swirl around Palm as moderate success for the Pre enhances its perceived value. The latest bets come from Shaw Wu of Kaufman Brothers, though he keeps his options very open, citing "great value in Palm as a strategic acquisition" but naming no fewer than seven possible suitors - Cisco, Dell, HP, LG, Motorola, Nokia and Samsung.

And the final offering from the rich pool of Palm speculation - another handset, this time a lower end product to replace the Centro and push webOS into the mass market. This product, codenamed Pixie or Eos, has been much talked-about this year, and is expected to feature a 2.6-inch multitouch display, inline keyboard, 2-megapixel camera and 4Gb of internal storage. It could arrive in time for the holiday buying season and likely to be positioned alongside other midrange webphones in the $99 space, aiming for the high volumes of Centro (though with the attendant impact on margins, since this is unlikely to be an exclusive or heavily subsidized model among carriers). Tavis McCourt and Justin Patterson at Morgan Keegan said in a research note this week: "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)."

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