Lenovo Leads Chase For Palm

Uncertainty continues to surround Palm’s future, as PC maker Lenovo emerged as the most likely candidate to buy it, according to Reuters.

Lenovo Now In The Hunt?

The Reuters report cited investment banking sources saying that they had heard that Lenovo is looking into a possible bid for Palm.

“A most suitable candidate will be a mainland Chinese company,” said Lu Chialin, an analyst at Macquarie Securities in Taipei, told the news agency. “They’ve got a lot more free cash and don’t have the brand presence in the United States, so that will all give them that boost they need.”

Meanwhile shares in Hong Kong-listed Lenovo rose as much as 5.9 percent to a 23-month high on Friday, although this was helped by strong growth predictions for the PC sector.

Possible Suitors Get Cold Feet

In eraly April, Palm reportedly hired Goldman Sachs and Qatalyst Partners to help find a company interested in acquiring the ailing smartphone maker. Names that have been lobbed around include companies such as Blackberry-maker Research in Motion, Motorola, Nokia and Huawei.

Smartphone maker HTC was mooted as possible bidder, but it apparently decided to pass after reviewing Palm’s books, a source with direct knowledge of the situation told Reuters.

“There just weren’t enough synergies to take the deal forward,” said the source, who declined to be identified because the talks were private.

Meanwhile telecom equipment maker Huawei also declined to put in a bid, a company source told the news agency earlier this month.

Some Attractions

Despite its poor financial situation, Palm does have some attractions, including a valuable patent portfolio, some well received handsets, a presence in the vital US market, and its webOS platform. However Palm was not helped earlier this week after the Dow Jones Newswires reported that the company was losing a key retail partner in that RadioShack stores are letting supplies of Palm Pre and Pixi smartphones run out, with no plans for replenishment.

Palm also lost senior vice president of software and services, Mike Abbott, who resigned.

Palm To Go It Alone?

Meanwhile Jon Rubinstein, chief executive of Palm has apparently insisted that Palm can survive as an independent company. This is despite disappointing sales of its flagship handsets, and the admission in March that more than half its phones it made this year are still in warehouses.

Rubinstein was quoted in the Financial Times as saying that Palm would look at letting other mobile manufacturers use its smartphone operating system, in an effort to boost the company’s revenue.

Rubinstein however was “bullish” about Palm’s long-term prospects. “I believe Palm can survive as an independent company,” he told the FT. “We have a plan that gets us to profitability.”

But he also acknowledged that Palm would consider takeover offers as the company is losing money and is currently examining all options, including a sale.