Best Buy Inflates Pre Price to Deter Advance Purchase

The Palm Pre, which goes on sale June 6 from Sprint Nextel Inc., is already appearing on the Best Buy Web site for a whopping $849.99, several times above the $200 price after a $100 rebate that Sprint has announced.

Sprint and Best Buy couldn't be reached immediately to comment, but bloggers speculated the Best Buy online price is artificially high to discourage Best Buy employees and other customers from reserving a purchase in advance due to expectations that there will be shortage of the new smartphones at the time of the launch.

The expected shortages were clearly described by Sprint's CEO Dan Hesse at an investors' conference earlier this week, according to reports.

"We don't intend to advertise it heavily early on because we think we are going to have shortages for a while," Hesse said, according to a Thomson Reuters. "We won't be able to keep up with demand for the device in the early period of time."

That Sprint and Palm would allow a device to go on sale in short supply, and the higher price on Best Buy, angered some of the Pre's early fans. One forum writer on EverythingPre, AldoJr, said of the device and the Best Buy price: "One step closer, two steps backwards."

Some analysts said Palm and Sprint deliberately scheduled the launch on the Saturday two days before Apple Inc.'s Worldwide Developers Conference, where more is expected to be revealed about the iPhone 3.0 software and possible iPhone hardware upgrades.

Both Sprint and Palm could use a boost, even if it is only transitory, given their financial pictures. The smartphone market will also be busy this summer, with highly anticipated iPhone and Pre launches as well as further news from Research in Motion Ltd., Nokia and several Android phone manufacturers.

"Pre-empting the iPhone news was a good idea because waiting to release the Pre after the iPhone news would have meant it would not get attention for many weeks, with iPhone garnering all the attention," said Jack Gold, an analyst at J. Gold Associates. Sprint also is probably not selling many of its other Palm devices and wants to get a jump on back-to-school sales in August, Gold said.

Gold also questioned whether Sprint and Palm have a shortage of Pres, especially given the way Hesse came out and bluntly described a shortage. "When you say those things, that we won't have many of these Pres on sale, it is saying, 'So, if you want one, get in line right now,'" Gold said. "It's reverse psychology, and it makes it sound like an exclusive item if you can't get your hands on one. So I'm not sure they do have an actual shortage."

Plus, if problems develop with supplies or activations, Sprint can be seen as having warned buyers, he added.