By Sinead Carew

NEW YORK (Reuters) - Palm Inc unveiled a Treo smartphone on Wednesday based on Microsoft Corp software to compete for business users against rivals such as Research In Motion's BlackBerry.
The new Treo Pro will be sold by Vodafone Group Plc and 02 in Europe in September, and by Telstra in Australia, Palm said.


In the United States, Palm does not have an agreement with a carrier to sell the phone, but it said enterprise demand is growing for unlocked phones that can work on any network.

CL King analyst Lawrence Harris noted, however, that the Treo Pro's price tag of $549 is high without the subsidies typically offered by carriers to lock in subscribers.

"Given the pricing and lack of carrier sponsorship in the U.S., we believe initial sales of the Treo Pro will be limited," said Harris, adding that only 21 percent of Palm revenue came from international sales in its fiscal year 2008.

The Treo Pro is Palm's first phone with Wi-Fi, a short range wireless technology that could boost Web speeds in weak cell phone reception areas, and Global Positioning System (GPS) technology that supports features such as directions.

Palm said the use of Microsoft's Windows Mobile 6.1 software would help it compete with RIM's BlackBerry Bold, a high-speed phone that goes on sale in Canada this week and is expected to be launched in the United States later this year.

"We've chosen to partner with Microsoft to compete effectively with RIM," said Brodie Keast, Palm senior vice president for marketing, but he added that there was plenty of room for both companies to grow in the smartphone market.

"Even with the growth in this market, 90 percent of the market doesn't have a smartphone. It doesn't make sense to fight over the 10 percent," said Keast in a telephone interview. "We want to reach out to people who don't have a smartphone, not people who already love RIM."

Keast said it was likely that more Palm devices would include Wi-Fi in the future as there is growing demand for alternative connectivity in areas where phone reception is weak, or when users want faster speeds to download big files.

"Going forward for premium, fully featured devices, Wi-Fi is a requirement," he said.

Keast said Palm was on track to come out with a new phone software platform aimed at consumers in the first half of next year, and that this would put it in more direct competition with the iPhone from Apple Inc .

He said he does not see the iPhone, which now supports corporate e-mail, as a direct competitor to the Treo Pro.

Palm shares were down 13 cents, or 1.7 percent, at $7.67 on Nasdaq in midday trading.

(Editing by Brian Moss)

© Copyright 2008 Reuters.