Palm Jumps on Report That Sony Covets Unit

Palm(PALM - Cramer's Take - Stockpickr) shares staged their strongest gain in weeks after Sony's(SNE - Cramer's Take - Stockpickr) chief executive voiced interest in the handheld maker's operating-system division.

Shares of Palm were up 30 cents, or 3%, at $10.45 in late trading, after Sony CEO Nobuyuki Idei said the company was interested in purchasing the operating system division of Palm. The comments were in a January interview published this week on the Web site of the Always On Network. The interview was conducted by Red Herring magazine co-founder Tony Perkins.

"I really want to own either Symbian or Palm -- I want to buy them," said Sony's Idei in the interview. "Three years ago the Palm was so simple, but it is getting better and better. My problem now is that as [a] Palm licensee we have to pay them lots of money."

Sony spokesman Greg Dvorken said, "With respect to any potential acquisition, nothing has been decided." He added, "We're always exploring new options regarding new alliances."

For Palm, Sony's intentions could put a short-term floor on the stock. A recent J.P. Morgan downgrade and Palm's decision to slash its workforce by 20% instigated a selloff last week.

The Idei interview didn't indicate whether any discussions had occurred. Last October, Sony invested $20 million for an estimated 6% stake in the operating system division of Palm.

A spokeswoman for Palm's operating system division, which is known as PalmSource, declined to comment on the matter. "At this point, all the plans that have been discussed openly are still the same," she said.

Palm is widely expected to split off PalmSource sometime early this year, hoping more operating-system licensees would be attracted to an independent company.

"We should not optimize [the company] for the next six months, but for the next few years," Palm CEO Eric Benahmou told analysts last October at an analyst event in New York. "We could not do that if PalmSource remains captive to Palm Inc. Already we've seen a much deeper level of commitment from our licensees."