UPDATE: Sprint Pulls $100 Credit Offer On Palm Pre

Sprint Nextel Corp. (S) pulled a $100 service credit offer that would have halved the price of the Palm Inc. (PALM) Pre.

A spokesman for the Overland Park, Kan., carrier said the offer was erroneously made available in the company's system. While Sprint has the flexibility to offer such a discount on an individual basis, it wasn't intended to be a formal offer.

The service credit, which was available to new customers looking to switch from another carrier to Sprint, was looked at as an aggressive tool to reverse the subscriber losses it has suffered over the past two years.

The credit amounted to a $100 discount on the $200 Pre, which has been positioned as the flagship device for the Overland Park, Kan., carrier. While the touchscreen device has been moderately successful, it hasn't done much to draw new subscribers.

When the offer was available, industry observers said it would boost interest in the phone and the carrier.

"We believe this incremental price break will help stimulate sales for Sprint depending on how much they advertise it," said Walter Piecyk, an analyst at Pali Research.

The Pre didn't jump out of the gate, hurt by supply constraints that meant the devices were largely confined for sale at Sprint stores. The phones eventually became available to nationwide chains such as Best Buy Co. (BBY), and the company had hopes that their broader reach would mean new customers.

For Palm, there is a limited window for success for the Pre. Cellphones often get discounted after a few months on the market, particularly if they don't sell well.

Robert W. Baird analyst William Power said Research in Motion Ltd.'s (RIMM) Blackberry Tour was the most recommended smartphone at Sprint stores, with Pre a close second.

Looking ahead, the HTC Corp. (2498.TW) Hero, powered by Google Inc.'s (GOOG) Android software, will hit Sprint stores in October. The carrier is expected to launch several other high-profile smartphones in the coming months.

Palm will have to rely on a second device using its WebOS platform, widely expected to be unveiled in the coming weeks, as well as the Pre showing up at Verizon Wireless next year.

Sprint closed down 3% to $3.70. Palm closed up 2.5% to $14.98.

-By Roger Cheng, Dow Jones Newswires; 212-416-2153; [e-mail]