June 6, 2002 12:05 PM PDT

A Palm in the hand is worth two

Aiming to reverse slowing sales, handheld maker Palm said Thursday that it will give away an entry-level m105 handheld to those who buy an m500 handheld.


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Palm m500 prices
Palm m105 prices

The monthlong promotion gives those who buy a $299 m500 a mail-in coupon good for a free m105. Palm spokesman Jim Christensen said that by giving away the devices, Palm hopes to spur sales now, while at the same time putting devices in the hands of new customers that might buy a pricier handheld down the line.

Christensen said the move is one of several promotions the company has planned this quarter to try and boost demand in the weak summer sales period. Last week, Palm warned that sales and revenue would fall short of expectations for its May-ending quarter and that sales would drop further for the current quarter, which runs through August.

In a conference call with analysts last week, Palm executives said they did not expect the promotions to spark a price war, noting that handheld prices have largely stabilized after a free-fall last year. Christensen said the m105 giveaway is consistent with a strategy of creating promotions that do not permanently knock down prices for handhelds.

Bear Stearns analyst Andrew Neff said in a research note Thursday that U.S. retail sales for the week of May 25 showed handheld demand deteriorating.

"For the second consecutive week, overall sales of handhelds fell during the week," Neff said. The decline, however, was modest, with sales down 5 percent in dollars from the prior week and the number of units sold roughly the same as the prior week

In conjunction with the new promotion, Palm also announced it is introducing a free program called DualDate, which allows two Palm handhelds to exchange calendar data and lets two people view their datebooks side by side on separate devices. The program stems from Palm's acquisition of WeSync, announced in December 2000. At the time, the deal was valued at between $40 million and $45 million.

DualDate, which requires Palm OS version 3.5 or later, is available for download from Palm's site.

An industrial-strength version of the WeSync software, which allows up to eight calendars to be viewed together, is also available from the WeSync Web site.

 

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