With about three month's worth of Palm handhelds sitting on shelves and in warehouses, some retailers have begun selling the devices well below listed prices.
And in what could be a more troubling sign, some of the price cuts are coming on Palm's newest models: the m500 and m505.
Electronics retailer Best Buy has been the most aggressive, chopping the prices of all Palm models and several handhelds that run on Microsoft's Pocket PC operating system. Significantly, though, the deepest cut comes on Palm's m500, which is selling US$70 below its listed price of $400.
The m500, which started shipping last month, has also been spotted at one bulk reseller in the US for US$379, a US$21 discount.
The more recent color-screen m505 model also has been discounted at Best Buy, which has shaved about US$30 off.
Retail analyst Matt Sargent said Best Buy's prices are likely still above what the retailer is paying Palm - but just barely. And that is a bad sign for new products, he said.
"These are brand-new products," Sargent said. "It indicates they are not moving quite as fast."
Best Buy is also selling the Palm Vx, m100, m105 and VIIx at a discount and has lowered prices on Hewlett-Packard's Jornada and Compaq Computer's iPaq Pocket PC.
A Best Buy spokesman said the reductions are temporary, with the sale set to end Saturday. Other retailers have held firm, listing Palms at their standard price.
It is well known that a glut of Palm's older products exists, with the company saying in late March that it expected to see up to an additional US$200 million worth of goods pile up in its stocks during the current quarter. Palm also said in its most recent earnings warning earlier this month that there is more than three months' worth of inventory in the retail channel.
To help reduce inventory, Palm itself has kicked off a series of price cuts, as well as steep discounts for developers. It has also launched a program to reward salespeople with a free m500 if they sell 15 Palm handhelds of any model between April 26 and June 24.
Handspring has already made some tweaks to its pricing, but the company has so far avoided a price war.
