Ahead of the Bell: Palm downgraded on Pixi carrier

Palm shares slip as analyst downgrades, says choice of Sprint as Pixi carrier may hurt sales

• On 8:24 am EDT, Wednesday September 9, 2009

NEW YORK (AP) -- Palm Inc.'s choice of Sprint Nextel Corp. as the exclusive carrier for its new Palm Pixi smart phone may hinder sales of the device, a Credit Suisse analyst said Wednesday.

Analyst Deepak Sitaraman lowered his rating on Sunnyvale, Calif.-based Palm to "Neutral" from "Outperform." Shares fell 73 cents, or 4.9 percent, to $14.25 in premarket trading.

Palm announced Wednesday that a new phone called the Palm Pixi will be available in time for the holidays, although it did not say how much the new phone will cost.

Sitaraman called Palm a "credible competitor" in the emerging smart phone market, but said near-term sales are likely to disappoint without AT&T Inc. or Verizon Wireless offering service for the phone. Sitaraman cut his target price on the stock to $12 from $18.

He now expects Palm to sell 6 million smart phones next year, down from a previous estimate of 8.1 million.

That estimate also includes sales of the Palm Pre, the phone Palm launched earlier this year as part of an effort to regain its footing in the competition with Apple Inc.'s iPhone and the BlackBerry from Research in Motion Ltd. The Pre is also carried exclusively by Sprint.