Palm Inc. is up for sale, sources say

Palm Inc., creator of the Pre smart phone, has put itself up for sale in a move that could shake up the cell phone market at a time when more companies are introducing versions, according to three people familiar with the situation.

Asian companies could be among the bidders for Palm, which pioneered the hand-held device with the introduction of the Palm Pilot in 1996. Hewlett-Packard Co. also has been mentioned as a possible suitor.

Bids could come as soon as this week, according to the sources. Palm is working with Goldman Sachs Group Inc. and Frank Quattrone's Qatalyst Partners to find a buyer, they said.

Taiwan's HTC Corp. and China's Lenovo Group Ltd. have looked at the company and might make offers, the sources said.

Palm shares rose 32 percent last week on speculation of a takeover bid. The shares rose 17 percent Monday to close at $6.04 but remain well below their 52-week high of $18.09.

"Palm still has quite a good brand in the U.S. market, and some strong technology, so you can do something with it," said Frank He, a technology analyst at BOC International Holdings Ltd. in Hong Kong. "The shares have gone down a lot, and the company may become attractive to anyone looking for a turnaround play."

Palm would offer suitors the WebOS software that competes against mobile operating systems from Apple Inc. and Google Inc. Companies including Dell Inc. have been introducing new phones based on Google's Android system to compete with the iPhone.

Meanwhile, Microsoft on Monday introduced a new line of phones, called the Kin, aimed at young consumers, with slide-out keyboards for texting and a touch screen.

Palm has struggled amid the intensifying competition.

Chief Financial Officer Doug Jeffries last month forecast that sales in the quarter ending in May will be less than $150 million, compared with the $300 million average of analysts' estimates compiled by Bloomberg News at the time.

Palm lost about half of its North American market share between 2008 and 2009. Last year, it accounted for 4.2 percent of the region's smart-phone sales, down from 8.1 percent in 2008, according to Gartner Inc. Research In Motion Ltd., maker of the BlackBerry, led with 50.3 percent, followed by Apple's 24.3 percent.

CEO Jon Rubinstein was counting on the Pre and Pixi smart phones to attract customers.

Chen Hui-Ming, the chief financial officer of HTC, declined to confirm or deny the company's interest in Palm. Wong Wai Ming, Lenovo's chief financial officer, also declined to comment.

Nokia, which has been mentioned in the past as a suitor, declined to say whether it might be interested.

Dell looked at Palm, though it decided against an offer, according to two of the people familiar with the matter. Dell had no comment.

Analyst Roger Kay with Endpoint Technologies Associates said Palm is a not a good fit for Dell, which is expected to introduce its own smart phone, the Aero, in the U.S. soon.

"I think Dell has enough on its plate, and Palm has some problems that Dell is not an expert in," Kay said. For Dell to buy Palm "would kind of be taking on a boat anchor when they don't need to."

Founded in 1992, Palm helped pioneer the market for hand-held organizers with its PalmPilot devices. The company was acquired by U.S. Robotics, which was in turn purchased by 3Com Corp. 3Com spun off Palm in 2000.

Additional material from American-Statesman staff writer Kirk Ladendorf.