Analysts predict Palm Pre slump

Wall Street analysts predict gloomy future for the flagship device.

Wall Street analysts are predicting a slump in US sales for the Palm Pre which could force the mobile giant to cut prices later in the year, according to new reports.

In a note to investors, Ilya Grozovsky, analyst at Morgan Joseph, is reported to have downgraded his rating of Palm from "Hold" to " Sell" because of poor sales.

July pre-sales were down to about 100,000 units, from 200,000 in June, said the note, with August set to be even lower than July. Grozovsky is also reported as revising down his estimate on Pre sales for the August quarter from 400,000 to 350,000.

“Should sales prove to be in line with our checks, we believe price cuts may be looming going into the holiday season in an effort to spur holiday sales of the Pre,” he is reported as saying.

“This could, in turn, hurt Palm margins as we believe that Palm will have to make price concessions to Sprint."

Palm hoped the Pre would revive its flagging fortunes in the mobile market when it launched but despite good reviews, its best days could well be behind it.

Ashok Kumar, analyst at Collins Stewart, is reported as saying that “due to weakening demand”, production of the device for the remainder of the year has been cut by 500,000 units.

It has been a bad week for Palm, with the firm also having to fight off suggestions that it collects too much information from users' devices.

The device is set to become available to UK customers before Christmas, with O2 chosen as the exclusive carrier.