May 19 (Bloomberg) -- Sprint Nextel Corp. and Palm Inc. will start selling the Pre on June 6, looking to the Web- equipped touch-screen phone to revive their fortunes after losing customers to Apple Inc.’s iPhone and other devices.

The 8-gigabyte Pre will cost $199.99 with a two-year contract and after a $100 mail-in rebate, Sprint said today. The final cost is comparable to what AT&T charges for the iPhone and Research In Motion Ltd.’s price for the BlackBerry Storm, sold through Verizon Wireless.

Palm and Sprint stocks have more than doubled since the phone was unveiled in January on optimism that it will rekindle their flagging businesses. The device still may not have the brand appeal to compete with the iPhone and BlackBerry, the top two consumer devices in the U.S. last quarter, said Avian Securities LLC’s Matt Thornton.

“The Pre is not well known to the average consumer relative to BlackBerry and Apple, which means Palm has a lot of work to do to get that brand out there,” said the Boston-based analyst, who rates the stock “neutral.” RIM’s BlackBerry Curve model was the No. 1 U.S. device last quarter, followed by Apple’s iPhone 3G.

Palm declined 38 cents, or 3.2 percent, to $11.68 at 4 p.m. New York time on the Nasdaq Stock Market. Sprint, the exclusive U.S. service provider for the Pre, gained 18 cents, or 3.4 percent, to $5.50 on New York Stock Exchange.

IPhone Threat

After seven straight quarterly losses, Palm Chief Executive Officer Ed Colligan is banking on the Pre to recapture some of the success of the pioneering Palm Pilot products more than a decade ago. Like the iPhone, the Pre’s screen covers the device to make watching video easier. It also features a slide-out Qwerty keyboard, which the iPhone and BlackBerry Storm lack.

Sprint will release the phone just two days before Apple’s Worldwide Developers Conference, where the company will provide details on its new iPhone operating system.

“They clearly are stealing the thunder from Apple for a few hours,” said Tero Kuittinen, an analyst at GC Research Capital Ltd. in New York. “That’s always a risky strategy.”

At last year’s event, Apple unveiled a new iPhone model and revamped software, and analysts say the same may happen next month.

Apple is “looking forward to introducing the iPhone OS 3.0, a major software update with 100 new features for iPhone customers, this summer,” spokeswoman Natalie Harrison said.

Treo, Centro

Palm has challenged new iPhone models before, announcing a partnership with Verizon Wireless, now the largest U.S. mobile- phone carrier, for its touch-screen Centro model in June and a version of its Treo e-mail phone two months later.

Sprint also released the Samsung Electronics Co. Instinct last June, which had a touch screen and recorded videos, for $70 cheaper than the iPhone 3G.

Palm’s shares had lost about 40 percent in the year before the Pre’s January introduction, while Sprint had declined twice that much.

Sprint released the Pre as soon as it knew the phone would be “ready and had everything pulled together in a way that we thought best showcased this phone,” with little consideration for Apple announcements, said Kevin Packingham, vice president of marketing. He declined to comment on sales projections, application developers, the number of phones available and the length of Sprint’s exclusivity deal.

Retail Partners

Sunnyvale, California-based Palm plans to sell the device through Sprint’s shops and Web site. Radio Shack Corp., Best Buy Co. Inc. stores and some Wal-Mart Stores Inc. outlets also will offer the phone. Sprint had lost almost 4 million customers in the year through last quarter, hurt by corporate defections escalating competition with larger carriers.

Palm needs the Pre to be successful to revive sales, which slumped as consumers opted for rivals’ devices. Analysts say that will mean striking long-term deals in the U.S. with carriers besides Sprint, which trails Verizon Wireless and AT&T in customers. Palm won’t say when its deal with Overland Park, Kansas-based Sprint expires.

Sales growth of smart phones, handsets with Web and e-mail functions, will slow to 3.4 percent this year from 22 percent last year, according to research firm IDC. Still, the segment will perform better than the total mobile-phone market, which will shrink for the first time since 2001, Framingham, Massachusetts-based IDC said.

Palm developed a version of the Pre that will run on the so-called GSM networks used by AT&T in the U.S. and many carriers in Europe. Palm has said it will release the Pre in Canada in the second half of the year through Bell Mobility, a branch of BCE Inc., the country’s largest phone company.

While Palm has yet to pick a European carrier, it has “excellent options,” Colligan told analysts in March, without elaborating.

“Palm desperately needs a blockbuster,” said Roger Entner, a Boston-based analyst with Nielsen Co. who doesn’t own the shares.

To contact the reporters on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net; Amy Thomson in New York at athomson6@bloomberg.net

Last Updated: May 19, 2009 17:37 EDT