Palm Prepares to Put Itself on the Block

Struggling smartphone maker Palm (PALM) is reportedly gearing up for a sale and is poised to put out a call for bids in a move that could come as early as this week, Bloomberg reported Monday. Shares of Palm soared 20% in morning trading, climbing as high as $6.20.

The pioneering personal digital assistant firm is working through noted investment banker Frank Quattrone's Qatalyst Partners firm and Goldman Sachs to land a buyer that can make good use of its webOS operating system, which competes with Google's (GOOG) Android and Apple's (AAPL) iPhone OS.

Since the debut of its Pre phone early last year, Palm, with a market cap of around $1.04 billion, has seen its share price take a roller-coaster ride. The Pre premiered amid great fanfare and hype, with both industry-watchers and Wall Street lavishing praise on the device and citing its potential to relaunch the company into contention from its lagging position in the handset market.

The Pre was cited as a worthy rival to Apple's iPhone, a comparison further enhanced by the pedigree of Palm CEO Jon Rubinstein, a former Apple executive and engineer who played a key role in creating the iPod.

Who Could Be Interested?

But last month, Palm saw its share price hammered after it gave guidance that its next quarter's revenues would fall dramatically short of what Wall Street was expecting, prompting some analysts to issue zero price targets for the stock.
With the company's last quarter revenues in decline and its near-term outlook no brighter, Palm has apparently opted to search for another way to ease its investors' pain.

Two companies that reportedly have taken a look at Palm and may be considering bids are Taiwan-based smartphone maker HTC (HTCXF) and Chinese PC maker Lenovo Group (LNVGY). In November, Lenovo acquired the entire stake in Lenovo Mobile Communication Technology from a private-equity arm of Legend Holdings for approximately $200 million, with the goal of making mobile Internet a key growth driver for the company.

Three other handset makers companies have been cited by analysts as good fits for a Palm acquisition:

• Nokia (NOK), which has toyed with the idea of making a mobile software acquisition.

• Motorola (MOT), which has lately been relying on Google's Android operating system to help it escape from its financial funk.

• Samsung (SSNHY), but the handset maker isn't known for making large-scale mobile acquisitions.

Among the potential dark-horse bidders being mentioned are networking giant Cisco (CSCO) and online retail titan Amazon (AMZN). Cisco last month unveiled its CRS-3 supersize network router, and a Palm offering could be another add-on it offers to its telecom customers such as AT&T (T). And Amazon has learned a bit about creating portable devices with its Kindle, and a move into the mobile arena would only be as much of a stretch for the company as, say, its entry into cloud computing.