Sprint Nextel Corp. (S) Chief Executive Dan Hesse called the launch of the Palm Inc. (PALM) Pre smart phone the smoothest and best executed in the company's history despite supply shortages that left some customers waiting for the device.

The Overland Park, Kan., carrier launched the Pre June 6. Because of supply issues, the company focused on stocking its own Sprint stores at the expense of third-party retailers such as Best Buy Co. Inc. (BBY).

As a result, Pre purchases were mostly by existing subscribers. Sprint is expanding the supply into other distribution outlets, which should attract new consumers, Hesse told analysts during a conference call Wednesday.

Hesse, however, demurred from giving expectations on how well the Pre would attract new customers. He did note that the Pre launch helped mitigate the impact of the launch of the new Apple Inc. (AAPL) iPhone by AT&T Inc. (T).

Overall, Hesse said he was pleased with the performance in the second quarter, although he acknowledged there was room for improvement in keeping contract customers.

There remains a lag between the brand perception - still hurt from the service issues it suffered a few years ago - and the reality of improved performance and customer care, he said.

"You'll see gradual improvement," Hesse said. "There's no silver bullet."

Sprint maintained that it expects subscriber performance this year to improve over 2008, despite being behind the year-earlier pace. Hesse said he expects a stronger performance in the second half as the Pre and service improvements take hold.

In addition to the Pre, Sprint launched Research in Motion Ltd.'s (RIMM) Blackberry Tour at the same time as Verizon Wireless. Hesse said it was important to let consumers know that Sprint would offer Blackberry devices as quickly as any other carrier. With the increasing reliance on smart phones with high subsidies, there are concerns that Sprint would take a margin hit like AT&T does with the iPhone. Chief Financial Officer Robert Brust declined to give estimates for future margins, but said his goal was to keep them stable.

Brust added that he expects full-year capital expenditures to be below $2 billion, but expects a ramp up in spending in the second half on network investments.

-By Roger Cheng, Dow Jones Newswires; 212-416-2153; roger.cheng@dowjones.com