Sept. 9 (Bloomberg) -- Palm Inc., fighting Apple Inc. in the smart-phone market, cut the price of its Pre device by $50 and announced plans to release a cheaper touch-screen device this year.

The Pre, which Sprint Nextel Corp. began offering in June, will now sell for $149.99, Sunnyvale, California-based Palm said today in a statement. Palm’s new phone, called the Pixi, is thinner than the Pre and includes applications for social- networking sites Facebook Inc. and LinkedIn Corp.

“One of the design goals was to make it more compact, more customizable and also more affordable,” Katie Mitic, a Palm senior vice president, said yesterday in an interview. The price of the phone, sold exclusively by Overland Park, Kansas-based Sprint, will be announced at a later date, she said.

Palm is counting on phones powered by its WebOS operating system to bolster sales and return the company to profitability after two years of losses. Analysts predict the company will report a fiscal first-quarter net loss of $87 million next week, according to a Bloomberg survey. Chief Financial Officer Doug Jeffries said last month that Palm expects to be cash-flow positive by the second half of 2010.

Credit Suisse analyst Deepak Sitaraman today cut his rating on the stock to “neutral” from “outperform,” saying sales volumes may be lower than estimated. Palm fell $1.31, or 8.7 percent, to $13.67 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have more than quadrupled this year.

Like Cupertino, California-based Apple and Research In Motion Ltd. in Waterloo, Ontario, Palm is allowing outside developers to create programs for its devices and share the revenue from downloads. Palm said in August that it would allow others to sell applications for the Pre starting this month.

Customizable Cover

The back cover of the Pixi is one of its customizable features. Users can choose the standard black or pick from five designs, the company said. The Pixi, Palm’s second WebOS phone, is longer than the Pre because the keys are fixed below the screen, while the Pre’s keyboard slides out from underneath.

Sprint announced yesterday that it was offering a $100 service credit to new subscribers for the Pre, before pulling the promotion later in the day because of an error, spokesman Mark Elliott said in an e-mail. The Pre was still priced at $199.99 when the offer was announced.

To contact the reporter on this story: Ari Levy in San Francisco at alevy5@bloomberg.net

Last Updated: September 9, 2009 16:21 EDT