June 27 (Bloomberg) -- Sprint Nextel Corp., the third- biggest U.S. wireless carrier, is running short of the touch screen Instinct e-mail phone it began selling last week in a challenge to Apple Inc.'s iPhone, an analyst said.

Pali Research analyst Walter Piecyk in New York asked 100 U.S. Sprint stores about the availability of the Instinct, made by Samsung Electronics Co. Twenty-eight had five or fewer in stock, and 11 of those 28 had run out, Piecyk wrote today in a note to investors. One store said it sold more than 600 Instincts, and another claimed it moved 25 in an hour.

The Instinct joins High Tech Computer Corp.'s Diamond and LG Electronics Inc.'s Vu in challenging the iPhone, which made Apple the second-largest maker of so-called smart phones in the U.S. in less than a year. Sprint wants to keep customers from switching to AT&T Inc., the biggest U.S. wireless operator, which has exclusive U.S. rights to sell the new version of the iPhone when it hits stores July 11.

``There's clearly high demand for this product,'' Piecyk said in an interview. The biggest Instinct shortages were in Los Angeles, where one store claimed it had a 20-customer waiting list, he said. Piecyk rates Overland Park, Kansas-based Sprint ``neutral'' and doesn't own the shares.

Current Sprint customers were able to reserve an Instinct starting June 19, and the handset went on sale to the public the following day.

Sprint has said the first week of sales was its best for a new product. That, coupled with speculation about a takeover by Deutsche Telekom AG, has sent the shares higher for four days straight. Sprint rose 8 cents to $8.92 at 4 p.m. in New York Stock Exchange composite trading. The stock has climbed 7.7 percent since June 19.

`Very Aggressive'

``We're being very aggressive to work with our partners at Samsung to make sure our customers get them as fast as they can,'' Sprint spokeswoman Michelle Leff Mermelstein said. She wouldn't say how many handsets the company has sold.

After the iPhone debuted last June, Apple sold more than 6 million before running out in May. The new iPhone, which runs on speedier third-generation wireless networks, will include a global positioning system, download Internet content twice as fast as the old model and support business e-mail systems.

At $199, it's also as much as $200 cheaper than earlier models. The Instinct costs $130. Research In Motion Ltd.'s BlackBerry dominates the market for smart phones, handsets that offer Internet, e-mail and computer functions.

The Instinct's early success is a ``pretty good indicator'' it will continue to sell when the new iPhone goes on sale, Piecyk said. That could help Sprint, which lost 1.1 million contract subscribers last quarter amid complaints of poor customer service and dropped calls.

To contact the reporter on this story: Whitney Kisling in Washington at wkisling@bloomberg.net

Last Updated: June 27, 2008 16:08 EDT