Sprint CEO: Sees Pre Shortages For A While

Sprint Nextel Corp. (S) hopes the Palm Inc. (PALM) Pre may be a scarce item when it hits the market next month.

At least that's what Sprint Chief Executive Dan Hesse believes. He added that the company isn't planning a major advertising campaign early on, saying that demand is there.

"We'll have shortages for a while," Hesse told analysts during an industry conference on Tuesday.

Sprint and Palm earlier unveiled the launch date of June 6 for the Pre. Both companies have a lot at stake in the smartphone, which has been eagerly eyed by gadget enthusiasts over the past several months. Struggling Palm badly needs a hit device, while Sprint needs something to help stem the flow of fleeing customers.

The Pre "stacks up extremely well" with the competition, Hesse said. While the Apple Inc. (AAPL) iPhone is a good consumer device and the Research in Motion Ltd. (RIMM) Blackberrys are good business devices, the Pre is both.

"People have made compromises," Hesse said. "[The Pre] is truly both a consumer and business device."

Hesse also took a few shots at some iPhone shortcomings, including the lack of a removable battery, inability to multitask, more expensive service, and smaller third-generation, or 3G, coverage.

Hesse said Palm and Sprint would make available a strong library of applications, which has been one of the major advantages that Apple and the iPhone have had over other smartphones.

"Apps are clearly an important area," he said.

Hesse noted that the financial structure is similar to standard deals with handset makers. The device will retail for $199.99 with a two-year service agreement and $100 mail-in rebate. Like AT&T Inc. (T) does with the iPhone, Sprint will subsidize part of the cost of the device.

On Sprint's $50 flat-rate Boost Unlimited plan, Hesse said there is little cannibalization of its core Sprint and Nextel customers. He said the number of customers migrating from its more pricey contract services to Boost is in the low-single digits.

Boost presents an opportunity to increase penetration, Hesse said, noting that rivals Leap Wireless International Inc. (LEAP) and MetroPCS Communications Inc. (PCS) also posted strong numbers in the last quarter. He said he doesn't believe the market is crowded.

The economic impact will have some impact on pre-paid demand, he said. It's too early to tell if the turnover goes up down the line, he said.

Hesse also commented on WiMax and its partnership with Clearwire Corp. (CLWR), noting that Sprint is waiting for more of a deployment before launching the service. He touted the company's WiMax mobile hotspot, which uses the WiMax network to create a portable Wi-Fi connection. He noted that the iPhone could tap into one of these hotspots.

Sprint rose 1.5% to $5.40 in premarket trading.

-By Roger Cheng, Dow Jones Newswires; 201-938-2020; [e-mail]