Palm's suitors could include RIM, Lenovo, Dell, HTC

Palm Inc. stock was up more than 16% this morning on continued speculation the company is on the sales block. Bloomberg News first reported last week that Palm had hired investment bankers Goldman Sachs and Qatalyst Partners to explore a possible sale.
The handset maker, which has enjoyed critical success with its WebOS platform, has had difficulty getting the mass distribution needed in an increasingly crowded OS space dominated by Apple, Research in Motion Ltd. and the fast adoption rate of Google Inc.’s Android operating system. Nevertheless, Palm CEO John Rubenstein said the company’s recent struggles have been a bump in the road, so a potential sale of the company marks a huge change in strategy, noted Ross Rubin, a wireless analyst with NPD Group Inc. Possible suitors for the company include Dell, HTC and Lenovo, although a dark-horse player could bid for Palm. HTC, which manufactures smartphones licensing other OSes has been an oft-mentioned partner, but the handset maker might have a difficult time supporting Microsoft Corp.’s Windows Mobile OS, Android’s OS as well as its own OS, Rubin said.
RIM might be a more interesting play from a technical perspective because the two companies share the same business approach to vertically integrate the OS into the device. “From a technical perspective, RIM has exactly the kind of marketshare and momentum that WebOS needs right now,” Rubin said. RIM’s OS is due for an update, and the company is expected to shed some light on the future of its BlackBerry OS at an upcoming developers’ conference, Rubin said.
Lenovo and Dell may be interested in Palm in order to offer their own OS on smartbooks as that category develops and the PC makers delve into the smartphone segment. While Microsoft—which also had a dated OS — has the financial luxury to reinvent its OS without having to produce accompanying revenues quickly from the R&D investment, Palm does not have the financial muscle to do the same, Rubin said. The company has about $50 million on hand to sustain it, and largely is done spending on research and development for awhile, but may have increased marketing costs as operators Verizon Wireless and AT&T Mobility start to sell Palm devices. While presences as the nation’s largest carriers could increase Palm’s distribution problems, the two carriers aren’t likely to put as much marketing muscle behind Palm’s products as Sprint Nextel Corp. did when it carried Palm WebOS devices exclusively.
Palm also has a rich patent portfolio since it was one of the first personal digital assistant makers in the space, which could make Palm valuable to HTC, which is being sued by Apple for patent infringement, Rubin said.