Palm Pre has a halo effect for Sprint

Pre's 'coolness' will lead to customers' seeing more value from Sprint, executive says

WALTHAM, Mass. -- Sprint Nextel Corp. has weathered financial and customer care problems in recent years, so the carrier has a lot riding on the success of its new Palm Pre smartphone. Some early indications are positive.

Demand for the device, which went on sale June 6, has "exceeded expectations," said Tim Donahue, vice president of business marketing at Sprint, in comments to reporters at the Sprint Productivity Now conference for business users. Customers are being put on waiting lists with an average waiting time of a week or less, he said.

Sprint and Palm Inc. won't divulge actual sales figures, but analysts estimated that up to 100,000 Palm Pre devices were sold in the first weekend in the U.S. In comparison, Apple Inc. said it sold 1 million iPhone 3G S devices globally in its first weekend of availability.

Sprint is also capturing customers from other wireless carriers, although Donahue wouldn't detail how many.

"We're seeing a good balance of new Sprint customers" and existing Sprint customers, he said. "The device is interesting and compelling to people with other carriers."

While the Pre might seem like the latest alternative to the iPhone for consumers, it is also striking a chord with business users, Donahue said. "On the business side, the Pre has the majority of things you'd want for business uses, and it has a coolness factor," he said. "The physical keyboard is a big deal to business users, and you can get Exchange out of the box. But even business users like to be a little cool, so that's why we're seeing business-to-business users" buying it.

Donahue conceded that business users are buying the device for personal and business use without the support of a central IT department. "IT will evolve to support it as we put more advanced security features it," he said.

Palm has said that a set of security features is coming in less than 60 days. Donahue said he can foresee Palm and Sprint eventually backing a centralized management approach similar to Active Sync from Microsoft Corp. "It won't be a BlackBerry Enterprise Server equivalent, but more in the Exchange Active Sync environment," he said.

How extensively the Pre will be adopted by large businesses is not clear. One Sprint business customer at the event asked whether there is a way to prevent sharing of her publishing company's proprietary information through social networking sites over Pre devices used by employees at her company. A Palm official, who asked not to be named because he's not a company spokesman, told her that the Pre won't sync information from social networking sites, so the information cannot be stored on the smartphone. However, there is also no central management of the Pre to prevent employees from accessing social network sites.

Generally, the Pre is helping Sprint "overcome perceptions" about the company, Donahue said, because business customers are asking about the device, which gives business sales teams the chance to talk about Sprint's positives.

Donahue said that in regular meetings with business customers, he often hears concerns over Sprint's financial condition, which has gradually improved in the past year. "They tell us that they have to make certain they are doing business with a financially stable company," he said. "At the same time, they have praise for our portfolio," including new items like the Pre.

Donahue and Keith Dardis, regional vice president at Sprint, laid out a number of ways in which Sprint has improved customer care, including reducing the number of support calls and resolving more problems on the first call than in the past.

"On the customer care perspective, we are absolutely turning that ship around," Dardis said. "We're making sure we address problems if they occur."

Donahue said there have been no significant, systemic problems with the Pre or the network supporting it, which has not been the experience of some of its competitors when introducing new phones. He didn't name the iPhone 3G, but AT&T Inc. faced networking problems when it launched that smartphone last July.

"We're almost three weeks into selling this Pre, and the fact there are no major problems is a really good sign," Donahue said. "On the network side, we're very, very pleased that it's performing great."

Donahue also said that Sprint worked with Palm for as long as 18 months on "everything" connected with the product, including shaping its operating system, applications and hardware, and even the colors used to promote the product. Sprint had the same level of involvement with Palm when the Centro, a smaller smartphone, was first designed. Sprint has more of its customers using Palm devices than any other carrier, Donahue noted.

Because of that involvement, the Centro was later sold by Verizon Wireless with Sprint's features. When Verizon begins selling the Pre, as expected next year, Verizon will "absolutely" have a set of changes Sprint invoked, Donahue said.

"The Pre has renewed interest in Sprint ... and has created excitement around Sprint, so it does have a halo effect," Donahue said. "We see it as a great opportunity for us to introduce people to a broader, more extensive portfolio of products."

One Sprint customer, the Charlottesville, Va., fire department, has been a longtime user of Sprint Nextel's iDen network, which offers quick communications over push-to-talk technology. While the Pre doesn't support push-to-talk and won't be adopted by the fire department, Chief Charles Werner said he personally likes the device and what it can do for Sprint.

"I like devices, so I'm interested in the Pre," Werner said in an interview. He added that while he has always gotten good customer care from Sprint, his experience has improved even more in the past year.

The Pre has at least started to be a boost for Sprint but won't have the same impact on the company that the iPhone has had on AT&T, said Roger Entner, an analyst at Nielson IAG. "The Pre will absolutely give Sprint a boost. It helps Sprint to have a really cool device like the Pre," he said. "At the same time, I don't think the Palm Pre is the same game-changer as the iPhone has been for AT&T."

Copyright © 2009 IDG Communications, Inc.

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