Amazon.com and Wal-Mart have reduced the selling price of the Palm Pixi to $24.99, with a two-year service contract on Sprint’s 3G network, only days after the carrier debuted the smartphone for $99, according to published reports. As of Nov. 20, the carrier had not altered the Pixi's price on its Website.

The Pixi smartphone runs Palm’s webOS and features a 2.63-inch multitouch screen, a full HTML browser, a dedicated QWERTY keypad and a 2-megapixel camera. It supports personal and enterprise e-mail accounts, IM, SMS and MMS messaging, a universal search feature, and can link together contacts and calendar information from various sources. It’s been branded as a junior sibling of the Palm Pre, which arrived on June 6 — two days before Apple’s introduction of the iPhone 3G S.

“Dropping the price this quickly is a sign that Palm is not getting the uptake that it hoped for, and therefore sales aren’t that great — which is going to affect both companies, Palm and Sprint,” Roger Kay, an analyst with Endpoint Technologies, told eWEEK. “It doesn’t say good things about Palm’s ability to position its products properly.”

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Kay offered that Palm was also "facing a bit of bad luck." When it first arrived, the iPhone was the big competition out there. And while the iPhone is still considered the smartphone to beat  — during its fiscal fourth quarter, Apple reports it sold 7.4 million iPhones — in the last few months, a slew of Android phones have arrived on the market.

Palm may have anticipated Android’s arrival, said Kay, “but they couldn’t have known the magnitude with which Google would step into that gap. The broad positioning of Android kind of puts Google upwind of Palm. And that’s a bad thing for them.”

In a Nov. 12 Gartner report, analyst Carolina Milanesi pointed out that the number of new competitors also makes things difficult for the Android phones.

“The third quarter of 2009 saw the announcement of many new mobile devices, including several Android smartphones ready for the holiday season in the fourth quarter, but hardware commoditization and the growth in open platforms, will make it harder for them to stand out,” Milanesi wrote.

Milanesi additionally pointed out that while smartphone and mobile phone sales were up, stagnated selling prices, as well as gray-market sales, made for a flat quarter, compared to a year earlier.

On Oct. 29, Palm announced during its third-quarter earnings call that while the Pre was making an impact, it still lost 801,000 post-paid subscribers during the quarter — an improvement from the 991,000 the quarter before.

Kay offers the reminder that Apple abruptly lowered the price of its first iPhone from $600 to $400 just three months after its June 2007 debut — and people were furious. In a rare concession, Steve Jobs offered early adopters a $100 store credit.

Should Palm be offering refunds, or partial refunds?

“It certainly creates an image problem for them,” Kay said. “They have to do something about that.”