April 29 (Bloomberg) -- Palm Inc. may stockpile fewer than 400,000 Pre models when the touch-screen device goes on sale this year, making the phone scarce to enhance its allure to consumers, analysts said.

The Pre will debut with about 375,000 units in stock, according to the median estimate of six analysts surveyed by Bloomberg. Apple Inc. sold 1 million iPhones in the three days after the debut of a faster 3G model last July. Half of Apple’s stores in the U.S. had sold out by that time.

A sellout may help the Pre generate the buzz needed to win customers away from the iPhone. Palm is counting on the Pre, which has a wireless charger and software that lets users shuffle through applications like a deck of cards, to revive its reputation as a phone pioneer, as well as profit.

“It’s important to have a success like selling out,” said Hugues de La Vergne, an analyst at Gartner Inc. in Dallas. “The Pre has to live up to the hype or else they’ll lose their momentum to rival products coming out soon after.”

Palm stock has more than tripled since the start of January, when the company introduced the phone at a trade show in Las Vegas. Sunnyvale, California-based Palm and partner Sprint Nextel Corp. are depending on each other to lift their fortunes. Palm has posted seven straight quarterly losses, while Sprint, the third-biggest wireless carrier in the U.S., has lost 4.5 million subscribers since CEO Dan Hesse took over in 2007.

‘Make or Break’

“It’s a make-or-break product for them,” said Brad Williams, a fund manager at MTB Investment Advisors in Baltimore with $14 billion in assets, including Palm shares. “Working against Palm is the economy and its partnership with Sprint, which is not viewed as a strong carrier.”

Palm may have trouble securing enough parts for production when compared with larger competitors, said Tero Kuittinen, an analyst at GC Research Ltd. in New York. He rates the stock “overweight.”

“Typically the large vendors lock in the quarters well in advance when they negotiate with their suppliers,” Kuittinen said. “Palm is subject to some constraints, as everyone and his uncle is into touch-screen devices.”

Each Pre costs Palm $170.02 to make, according to an estimate published today by iSuppli Corp., an El Segundo, California-based research firm. The display, which accounts for 23 percent of the total cost, is the device’s most expensive component, iSuppli said.

Few Details

Palm and Overland Park, Kansas-based Sprint haven’t disclosed production targets or a price for the Pre. The device will go on sale in the first half of the year, the companies have said without elaborating.

“We’re working really closely with our carrier partner on distribution,” said Leslie Letts, a Palm spokeswoman. She declined to comment further. Sprint spokesman Mark Elliott didn’t return calls seeking comment.

ResearchIn Motion Ltd., maker of the BlackBerry, sells a rival touch-screen device through Verizon Wireless called the Storm. It sold 1 million units between Nov. 21, when the device went on sale, and mid-January.

Palm rose 24 cents to $9.89 at 4 p.m. New York time on the Nasdaq Stock Market. Apple, based in Cupertino, California, gained $1.24 to $125.14, while RIM dropped $1.31 to $66.79. Sprint, which trails Verizon Wireless and AT&T Inc. in U.S. wireless subscribers, advanced 8 cents to $4.24 in New York Stock Exchange composite trading.

Too High?

Palm must be careful not to set the Pre’s price too high, Kuittinen said. As the economic slump worsens, smart-phone users may think twice about switching to the device, he said. The International Monetary Fund said last week that the global recession will be deeper than previously thought as financial markets take longer to stabilize.

The 8-gigabyte iPhone is available for $199 through AT&T on a two-year contract. The 16-gigabyte version is $299. The BlackBerry Bold, Waterloo, Ontario-based RIM’s premium model, is sold through AT&T for $299 with a two-year contract after mail- in rebates.

If the Pre sells for $300 after rebates, as Kuittinen expects, “that is going to certainly limit demand,” he said. “Sprint doesn’t have many high rollers left, as most of them have defected for the iPhone, the Storm or the Bold.”

To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net

Last Updated: April 29, 2009 17:43 EDT