Jan. 8 (Bloomberg) -- Palm Inc., aiming to dent the dominance of Apple Inc. and Research In Motion Ltd. in the smart-phone market, unveiled a touch-screen handset to rival the iPhone and BlackBerry. The shares surged the most since 2004.

The Palm Pre works with new software called Web OS and has a slide-out keyboard, the company said today at the Consumer Electronics Show in Las Vegas. The phone will be available in the first half of the year exclusively through Sprint Nextel Corp. Pricing has yet to be determined, Palm said.

Chief Executive Officer Ed Colligan is counting on the Pre to reverse plunging sales at the Sunnyvale, California-based company. Palm’s earlier devices haven’t kept pace with Research In Motion’s BlackBerry and Apple’s iPhone, spurring an exodus of customers. The Pre’s success may determine Palm’s long-term survival in a market it helped create, said Lawrence Harris, an analyst at CL King & Associates in New York.

“They still have it,” said Harris, who has a neutral rating on the stock and doesn’t own it. “There have been many analysts on Wall Street who said Palm’s future is dim. Today the company proved some of those naysayers wrong.”

Palm jumped $1.15, or 35 percent, to $4.45 at 4 p.m. New York time in Nasdaq Stock Market trading, the biggest gain since June 2004. The stock lost 52 percent last year. Sprint gained 20 cents, or 8.4 percent, to $2.58.

Pre Features

The Pre, which can connect to Wi-Fi networks, also features 8 gigabytes of storage, global positioning system software, a 3- megapixel camera with a flash, and a wireless charger, Palm said.

Sprint CEO Dan Hesse, who appeared at Palm’s presentation, said the third-largest U.S. wireless carrier will take pre- orders for the device.

The company introduced the Pilot in 1996, developing a category of devices called personal digital assistants. Those products evolved into smart phones by adding wireless features, and Palm’s Treo helped create that market as well.

The BlackBerry overtook Palm by winning over users of corporate e-mail. Sales of Apple’s iPhone, released in 2007, also eclipsed those of the Treo. Palm’s smart-phone shipments dropped 13 percent last quarter and the company has posted net losses the past six quarters.

“Apple thus far has set the standard in terms of ease of use and intuitive nature,” Harris said. “That’s the target Palm went after.”

The Pre’s user interface is solid and the ability to switch between applications and multitask are advantages, Harris said.

Smart-Phone Market

Apple veteran Jonathan Rubinstein joined Palm in 2007 when Elevation Partners LP acquired 25 percent of the company. Paul Mercer, a software engineer who helped create Apple’s iPod, was hired earlier that year. Elevation increased its stake by $100 million last month, giving Palm cash to create new phones and to provide a cushion from the U.S. recession.

The smart-phone market overall will grow next year, even as sales of other devices shrink, research firm IDC said last month. The market will expand 8.9 percent worldwide in 2009, compared with a 1.9 percent decline for the rest of the mobile- phone industry, IDC said. That gives Palm a chance to make gains, Harris said.

“It’s a critical juncture in the company’s history,” he said. “This really is their best opportunity. A second opportunity might not make it.”

To contact the reporter on this story: Amy Thomson in Las Vegas at athomson6@bloomberg.net

Last Updated: January 8, 2009 18:27 EST