Palm Inc. (Nasdaq: PALM) can’t seem to catch a break.

Just days after its stock hit a 52-week high and its new Pre smartphone sold out in its Saturday debut, Apple Inc. (Nasdaq: AAPL) stole Palm’s thunder by announcing a new iPhone, the iPhone 3G S, and more importantly, cut the price on its existing 8 gigabyte model to $99-half the price of the Pre.

The move was a very shrewd one that will allow Apple and its iPhone to stay ahead of the pack in the smartphone industry. But Palm’s attempt to win a share of the market by releasing a smartphone that is compatible with Apple’s iTunes computer software shows that it is determined to give Apple a run for its money.

Pre had an impressive launch, but gauging just how impressive will be difficult until Palm actually reveals the numbers. Analysts’ estimates range between 50,000 and 200,000 Pres sold this past weekend. Apple’s first-generation iPhone sold 146,000 units on its launch day alone back in 2007.

Shortages of Pre may be to blame for a cooling of investor interest Palm reached its 52-week high of $14.14 on Friday: The shares had fallen 10% by Tuesday’s close and were down another 5.5% in mid-afternoon trading yesterday (Wednesday). And it isn’t likely that a Pre shortage-artificial or not-would produce the feverish demand that’s sometimes seen with electronic products … demand that can send the product-maker’s stock into a stratospheric climb.

Palm’s Pre is billed as an "iPhone killer" by some, but it really isn’t and probably never will be unless it can rival Apple’s impressive arsenal of iPhone software applications – known as “apps” in the technology lexicon.

Apple’s “App Store” – an online store that sells added features for the iPhone like access to Google Earth, the Weather Channel, and social-networking site Facebook – is a big reason for the iPhone’s popularity. More than 1 billion apps were downloaded to iPhones since the App Store’s launch last July. 

To date, there are 50,000 applications available for iPhone. The closest competitor, Google Inc.’s (Nasdaq: GOOG) Android cell phone operating system, has only 5,000 apps available for HTC Corp.’s G1. Pre had only 18 apps at launch.

Apple takes 30% of the revenue generated by the App Store. Apple Chief Executive Officer Steve Jobs says the App Store generates $1 million in revenue daily, which would mean his company makes about $300,000 from the App Store daily.

Lightspeed Venture Partners‘ Managing Director Jeremy Liew said Apple made $45 million from the App Store in its first nine months.

Apple’s exclusivity with AT&T Inc. (NYSE: T) is due to end next year, and iPhones may become an option on the largest U.S. wireless  carrier – Verizon Communications Inc.’s (NYSE: VZ) Verizon Wireless unit – as soon as next year, according to a USA Today report. That would expose a whole new customer base to the iPhone and its popular applications. Sources told The Wall Street JournalPre is set to debut with Verizon in January.

While it remains to be seen if iPhone can be toppled, the one safe bet is that the smartphone market will get more crowded. In addition to Apple’s iPhone and Palm’s Pre, Research in Motion (Nasdaq: RIMM), which makes the Blackberry, are all jockeying for market share.

Blackberry’s biggest advantage over the iPhone and the Pre is that it isn’t subject to limiting exclusivity agreements: The Blackberry is available to customers of all major U.S. wireless carriers. Currently, anyone who wants an iPhone has to be a part of – or switch to – AT&T’s network, and anyone who wants a Pre must be a to be a Sprint Nextel Corp. (NYSE: S) customer.

Analysts are mixed on RIMM’s outlook, but the consensus estimate among analysts is that the Waterloo, Ontario (Canada)-based company will earn $3.96 per share for the current fiscal year, and will see its profits advance to $4.70 per share in 2010. That would push the Price/Earnings (P/E) ratio – currently 25 – down to 17.5 on a company whose earnings are projected to grow at an average annual rate of 20% for the next several years.

Bob Blandeburgo
Money Morning

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