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Sell Block: Palm’s Post-Pre Problems

It’s time to take profits on Palm, Cramer told viewers on Thursday. Investors who want a play on smartphones and the mobile Internet should buy Apple instead.

“Apple’s the better company with the better product,” the Mad Money host said.

Apple’s new iPhone 3GS launched barely two weeks after Palm’s much-hyped Pre and quickly stole the show. It took only three days for Steve Jobs’ company to sell a million units. During this week’s earnings report, Apple said it couldn’t keep up with the demand for the sleek handset. Consumers love the operating system, the iTunes platform and the App store, it seems, making it all but impossible for Palm to measure up.

Official sales numbers for the Pre haven’t yet been released, but Barclays said that demand tapered off in July. Complaints are rolling in about both the software platform and the hardware, and Jesup & Lamont put the return rate at as high as 40%. When you factor in that the Pre’s carrier, Sprint , lacks the marketing muscle of AT&T , the iPhone’s carrier – and marketing is crucial in this business – there seems little reason to continue holding onto Palm. After all, the Pre was supposed to be this company’s future, and that future is looking rather dim right now.

With the iPhone, the still-popular iPod and a computer business that is “exceeding expectations despite the slowdown,” Cramer said, Apple is the stock to buy. He thinks AAPL could reach $200 in the next few months.

As for Palm, Cramer put that company in the Sell Block.

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