June 08, 2009

Palm missed out on a big opportunity to cash in on pent up demand for its widely praised Palm Pre by having limited inventory for the highly anticipated product's launch last weekend.

By all accounts, supplies of the product were limited at Sprint Nextel stores even as customers lined up to buy it.

Bloomberg reported that Sprint , the Pre's exclusive wireless carrier, ran out of inventory at some stores, putting customers on waiting lists. There were reports that a number of stores had a handful of phones available.

Jonathan Atkin, an RBC Capitals Markets analyst, estimated that less than 100,000 Palm Pre's were sold over the weekend, according to the Bloomberg report. He told Bloomberg that Sprint will "probably sell as many as get produced for the foreseeable future."

There's a fine line between making sure you are not saddled with excess inventory and having enough supply at product launch. In this case, Palm Pre officials made a bad call by not assuring there was enough supply at each and every Sprint store.

Remember this is Palm's big comeback. And it is a big time comeback! The Palm Pre represents a definite improvement in user interface and design over the Apple iPhone, RIM's Blackberry and any and all comers.

The product, which was engineered by Jon Rubinstein, the lead designer of the Apple iPod, has received a number of rave reviews. Indeed, the blogosphere is buzzing that the Palm Pre has out iPhoned the iPhone.

The technical tear down by the respected self repair site ifixit.com called the Palm Pre "very impressive" noting that the "Pre logic board is substantially smaller than the iPhone logic board, which is very impressive considering how renowned Apple's engineers are for shrinking hardware footprints."

Endgadget called the Pre "a great phone, and we don't feel any hesitation saying that." What's more, the Endgadget review called some of the "ideas and concepts at play in (the PalmPre) webOS are truly revolutionary for the mobile space, breaking down lots of the walls that separate the experience of using a dedicated PC versus using a handheld device. One feeling that we were constantly stuck by while testing the phone was a kind of revelatory, 'Hey, this actually feels how a computer feels.' It was an experience not completely unlike our first encounter with the iPhone -- that little light that goes on that tells you that things can really be different than how they've been before."

Manufacturing may have been held back by the engineering challenged posed by the product's design. One user calling himself Rihan on a Palm Pre Web OS support board said his Palm Pre "gets incredibly hot while just in stand by. Plus, it won't last on STAND BY for more than 3 hours!"

My bet is there are probably some manufacturing yield issues. Remember the type of technical breakthroughs that Palm has brought to the market probably mean lower manufacturing yields. That said, Palm should have made sure that it was able to get adequate yields before it launched the product.

Don't blow it Palm. Ramp up manufacturing at any and all costs. And get the product into the hands of consumers that want it right now. The clock is ticking. Remember, these kinds of devices are of the moment. They are impulse buys.

It's no small matter that Apple is set to unveil an iPhone upgrade in San Francisco today. Speculation around that product is also high with reports that Apple will upgrade iPhone with everything from a voice recorder to video capabilities.

Apple and other internet phone makers are moving fast. Palm had a chance to capture more market share and blew it.