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Palm makes eyes at possible purchasers

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Palm's CEO Jon Rubinstein hinted, when the firm announced a poor outlook during its last quarterly results, that he would be open to acquisition offers. Now the Pre maker is courting buyers more actively, hiring Goldman Sachs and Qatalyst Partners to seek offers as early as this week, according to Bloomberg.

The news service cites people familiar with the matter, and Palm shares leapt by eight per cent on the reports, though only in a few trades. This is the culmination of months of takeover talk, but while few disagree that Palm now needs a buyer to survive, it is less clear who will take the plunge.

Top of the list of candidates seems to be HTC, with Asian vendors, notably ZTE and Lenovo, seen as possible bidders too. Last year, much of the speculation focused on Nokia, but with its brand new Linux OS and its slow but steady progress in the US, the two attractions of Palm for the market leader are diminishing rapidly.

Palm's OS and heavily web-focused software platform are modern and generally well regarded, and help deliver an efficient mobile browser-based experience, but with all the giants working hard on this area, these advantages seem small compared to the challenges of integrating a new company and one-firm software architecture, plus sorting out a legacy line of products with dwindling market share.

These factors seem to weigh against an HTC purchase. The Taiwanese firm has one of the best user experiences in the smartphone market and is heavily wedded to Android and Windows, not requiring a new OS. It is also making most of its impressive progress in the US, so does not really need the benefit of Palm's presence and brand awareness there. Despite this, on Friday, Taiwan's Economic Daily News said that HTC had "opened discussions about an intent to acquire" Palm.

These Palm strengths might be more appealing to ZTE, which has entered the handset top five and needs to improve its western market presence, and its high end offerings. The Chinese vendor has no distinctive software or apps platform as yet and mainly supports those of operators like China Mobile.

"Palm's limited scale, distribution and weak global brand outside the United States all point to a takeover as the next chapter in the Palm story," CCS Insight analyst Geoff Blaber told Bloomberg. "The company has developed a highly valuable asset in webOS. The challenge for Palm is finding a buyer prepared to pay a premium for an immature platform when many potential suitors have already invested heavily in Android."

Copyright © 2010, Wireless Watch

Wireless Watch is published by Rethink Research, a London-based IT publishing and consulting firm. This weekly newsletter delivers in-depth analysis and market research of mobile and wireless for business. Subscription details are here.

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