Palm challenges iPhone by launching UK sales with O2

Palm, the latest company to challenge Apple's dominance of the smartphone market, yesterday launched its potential "iPhone killer" in Europe, with the two devices expected to clash over the Christmas period.

The Palm Pre was officially unveiled in the UK with Palm confirming it had signed an exclusive contract with O2, the operator that also has exclusivity for the iPhone. The device should hit the shelves "in time for the winter holidays" the companies said. The handset launched in the US earlier this month, two days before the announcement of the new iPhone 3GS.

Carolina Milanesi, a telecoms analyst at Gartner, predicts it will be the most competitive Christmas sales battle for years, adding the Pre was "probably the closest thing to an iPhone". Others hoping to muscle on to the Christmas lists include the Samsung Jet, HTC Hero, and Nokia's N97.

BlackBerry is also understood to be launching its second Storm phone in the autumn, which is expected to remain exclusively with Vodafone.

Jon Rubinstein, the chairman and chief executive of Palm, said Europe "continues to be an important region for Palm" and hopes to "spread the excitement Palm Pre has already ignited in North America".

The Pre is smaller than the iPhone, and offers its rival's touchscreen technology as well as a pullout qwerty keyboard, reminiscent of classic BlackBerry devices and designed with the business community in mind.

It is marketing the phone as bringing "your information from the many places it resides – on your phone, at work or on the web – into one simple integrated view". The group is backing its new operating system Palm webOS as the critical differentiator from its rivals.

Michael Brook, the editor of gadget magazine T3, said: "The interface is a real step forward. It is much more like using a computer. It looks great and is vastly more intuitive." He added: "It is the most serious challenger to the iPhone, it's just slightly let down by some of its build quality."

Palm previously tried to crack the smartphone market with the launch of the Palm Treo in 2002, followed by the Palm Centro five years later. Last year, however, Palm sold only about 3 million phones worldwide, of which almost 90 per cent were in the US.

This could be a problem for the new device, according to Tony Cripps, principal analyst at Ovum. He said: "The US has a residual love of Palm, and will hope the product succeeds. It'll be more of a battle in Europe where it's not well know for its phones."

O2 was in triumphant mood yesterday. Matthew Key, head of Telefónica Europe, said: "We are fast becoming the home of the smartphone."

Will Draper, an analyst at Execution, said: "It was a big surprise the others allowed O2 to win the Palm Pre. I don't think it'll be anything like as big as the iPhone, but it is an important launch for the Smartphone market." He predicts it will sell one for every 10 iPhones or even 20. "It won't be a blow out, but it will be second choice."

Tale of the tape: How the rival handsets compare

Palm Pre

Network: O2

Size: 100.5 x 59.5 x 16.9mm

Weight: 133g

Screen size: 3.1 inches

Storage: 8GB

Camera: 3.15 megapixels

Operating system: Palm webOS

Apple iPhone 3GS

Network: O2

Size: 115.5 x 62.1 x 12.3mm