May 19, 2003 11:42 AM PDT

Palm kicks off device swap

Handheld market share leader Palm is hoping that a new trade-in program will lead consumers to give up older devices for its latest models.

The Milpitas, Calif.-based hardware division of Palm kicked off a program Sunday through which consumers can trade in older Palm OS- or Pocket PC 2002-based handhelds for a $50 rebate on Zire 71, Tungsten T, Tungsten W or Tungsten C devices.

The handheld maker also cut the price of its Tungsten T from $399 to $349. Before rebate, the Zire 71 sells for $299, the Tungsten W for $549 and the Tungsten C for $499.

The high-end Tungsten T experienced lower-than-anticipated sales, which the company partly blamed for a third-quarter revenue warning. Palm ended up meeting its revised revenue estimates for the third quarter. Also, a previous cut on the Tungsten T from $499 to $399 helped pick up sales of the device by 75 percent.

Palm's trade-in program and price cut are designed to help garner the attention of repeat customers, an increasingly important group for Palm, according to Stephen Baker, an analyst with retail tracker NPD Techworld.

A large portion of Palm's customer base is repeat buyers, Baker said. "They were the only thing keeping the business viable for a while there," he said, adding that although such programs don't add all that much in terms of volume, they do get repeat buyers thinking again--back on the bandwagon. "Palm has to keep these folks engaged in the upgrade cycle."

The price cut comes at the second most significant buying season of the year, known as "Dads and Grads," referring to Father's Day and graduation, according to Paul Osborne, senior product manager at Palm. These holidays, along with Christmas, are the most important buying times of the year for the company.

"The price change for the Tungsten T allows us to make sure that it fits well with our lineup of other products," Osborne said.

Palm recently introduced two new devices, the Zire 71 and the Tungsten C, which, according to Baker, have met with at least modest success in the limited time they have been available. The Zire 71 has been selling since late April; the Tungsten C hit the market in early May.

Baker said that volume of the Tungsten C in the last two weeks has been "light" but added that in the segment of Palm OS devices that are priced at more than $400, the Tungsten C is a best seller. The Zire 71 had a fast start, becoming the No. 1 selling device for the market just weeks after launch, according to Baker.

Devices in the trade-in program must be purchased between May 18 and July 14, and proof of purchase, such as the receipt and UPC code, must be sent to Palm by Aug. 14.

Palm is in the process of spinning off its software subsidiary, PalmSource, but recently pushed back the schedule. The spin-off was expected to occur by the middle of the year, but in late March, Palm CEO Eric Benhamou said the move would be delayed until late summer.

 

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