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PalmOne shares soar on Dell purchase rumour

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PalmOne's shares jumped 12.5 per cent yesterday to $18.21 on the back of rumours that the company has become a Dell acquisition target.

It's certainly a possible course of action - Dell has the funds and the stock to make it happen. That said, it's not been a particularly acquisitive company in the past, though Michael Dell has never ruled out the possibility of buying other firms if there's a suitable fit.

Would that apply to PalmOne? Dell certainly has a stake in the PDA business and offers its own Axim series of Windows Mobile-based devices. Before the advent of Axim, back when PalmOne was simply Palm Dell used to sell its machines. Having dropped them to make way for Axim, would Dell now want them back?

Since that time, PalmOne has acquired Handspring, and so now comes with added smart phone expertise, along with the industry connections necessary to operate in that sector. Dell might well have an eye on that part of the business rather than PalmOne's pure-play PDA operation, which could at least be offered as an alternative to the Axim PocketPC line in much the same way it offers Linux alongside Windows.

But the highly vendor-specific nature of the mobile phone market goes totally against Dell's core sell direct model, and if it's really interested in offering Palm OS machines as well as PocketPCs, why doesn't in just license the Palm OS like everyone else - or, rather, partner with a Far Eastern licensee ODM who can make Dell-branded Palm-based PDAs.

That approach works for Axim, and it could easily work for a Palm OS-based product line. All PalmOne really offers a brandname, and Dell already has one of those. Dell, in short, does not need PalmOne, and that fact has to call into question any claim that it's interested in buying the company.

Add to that the fact that world PDA sales are declining, and you have to wonder why Dell would be investing sufficient time and money in the sector to simply for the privilege of selling more devices than HP. ®

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