Palm Pre Sales in "Substantial Decline": Analyst

palm-prePalm’s (s palm) bet on webOS isn’t paying many dividends, according to a research note issued by Northeast Securities analyst Ashok Kumar this morning. Domestic sell-through checks point to a “substantial decline” in recent sales of the Pre, Kumar said, and slashing the price to $99 hasn’t helped much. Nor is the upcoming launch of the Pixi likely to reverse the trend.

Those slowing sales are whittling away at the prospects for webOS, which Palm had positioned as a worthy competitor to the iPhone (s aapl), Android (s goog) and BlackBerry (s rimm) platforms. From the note:

“As a fading brand, carriers are likely to see better returns on their promotional and advertising dollars with other vendors…WebOS has negligible smartphone OS share, 0.2 percent per Gartner estimates, and is unlikely to attract any meaningful third-party application support. Palm has bet the farm on webOS and there is a real possibility that they may not achieve critical mass.”

The Pre failed to live up to expectations out of the gate — thanks largely to Sprint’s (s s) unwillingness to heavily market the gadget (GigaOM Pro, subscription req.) — and Palm’s next best hope for webOS appeared to be an upcoming launch with Verizon Wireless (s vz) early next year. But as Verizon’s Droid initiative demonstrates, the Google OS has captured the attention of the nation’s largest carrier. If it overlooks the Pre in favor of the Droid, that could put one more nail in Palm’s coffin.