Handheld Prices Unlikely to Drop Further
Despite some people's hopes, there are strong indications from Palm that they don't intend to cut prices again soon. Though Palm finds itself with hundreds of millions of dollars in excess inventory, it has two possible ways of getting rid of it: it can sell it to customers or it can write it off and take a loss on it. Palm has already tried the former and is now going to do the latter.
If Palm intends to sell all the units, it will probably need to reduce prices further. Indeed, Palm has already announced several price drops on models that it has excess inventory for.
But so far this hasn't been enough so Palm has announced plans to use the other method. Last week, Palm said it would take a $300 million charge to write off unsalable inventory.
There are at least two possible reasons for taking this radical step. One is that Palm wants this whole mess behind them so it can start fresh. The other is the company doesn't want its customers getting accustomed to cheaper handhelds.
Dropping prices has long-term risks for the handheld manufacturers. If people get used to paying lower prices, they'll expect all future models to be just as low. This would cut into all future profit margins.
CIBC World Markets analyst Tom Sepenzis believes that prices won't drop much more. "What we're seeing now is cuts on lower-end devices that Palm has built up inventory on, and Handspring is reacting to keep up," he said. "They can't get much lower."
Last month, the Palm Vx was reduced by $50 to $300. The Palm IIIc dropped to $300. Also, the price of the m100 was cut by $20 to $130. Handspring responded by cutting the Visor Deluxe to $200 and introducing a $50 rebate on the Visor Platinum.
But there has been another round of price cuts for one group: Palm developers. For them, the m100 is now $84 and the m105 is $130. The IIIc is just $178 and the Vx just $179. The wireless VIIx is only $119.
- Palm Announces Severe Revenue Shortfall, Big Loss
- Palm Cuts Prices in the Face of Excess Inventory
- Handspring Cuts Prices
- Handheld Price War Possible
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- I got one -Tuckermaclain
- RE: Don't we have this already? -Tuckermaclain
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- RE: Palm brand will return in 2018, with devices built by TCL -dmitrygr
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