The black-and-white cousin of the color m505 has lagged greatly in sales compared with the color model, according to several analysts. Both models were introduced in the spring, with the m505 selling for $50 more, at $449.
NPD Intelect estimates the m500 has accounted for 5 percent of Palm's unit sales in recent weeks, compared with around 15 percent of sales for the m505.
The price drop comes the same day that Microsoft introduced the latest version of its Pocket PC operating system and on a day where Palm shares fell to $3 a share, their lowest closing price ever.
Handspring's newest black-and-white model, the Visor Edge, has also struggled. On Aug. 20, Handspring cut the price of the slim, metal Edge by $100 to $299.
UBS Warburg analyst Don Young said in an Aug. 21 report that there were roughly 35.5 weeks of inventory of the Edge as of July 1, with August sales at that point having continued to weaken. NPD Intelect figures show the Edge accounting for about 5 percent of Handspring's unit sales in recent weeks.
While the Edge and m500 have struggled, high-end color models have fared better, such as the m505 and Sony's Clie.
Sony in particular has seen stronger sales of late, garnering roughly 10 percent of the U.S. retail market in recent weeks compared with the 2 percent to 3 percent it was getting earlier this summer.
Low-end models from Palm and Handspring continue to make up the bulk of unit sales. Palm still has roughly half the retail market and Handspring has been ranging from 20 percent to 30 percent.