Matchmakers' Hands Full With Palm

The time may indeed be right for Palm's(PALM) management and board to try to sell the company, as the smartphone maker's leading individual investor suggested recently.

But the key question is whether the company can find any takers. And many analysts and investors have their doubts.

Some of the same factors that investor Mark Nelson cited as reasons to explore a sale -- Palm's relatively high valuation, growing competition in the company's most important market and the risk of commoditization -- are the very same reasons why few, if any, companies might want to buy Palm.

"I don't put much credence in [Nelson's call for a sale of the company]," says Doug Pyle, a U.S. Trust portfolio manager, whose fund is long Palm. "It doesn't seem to work. I don't know who would want to be on the other end."

Others are more confident that Palm could find a buyer -- at the right price. But there seems to be little consensus about what company might make a good merger match.

"It is somewhat of a challenge," acknowledged David Linsalata, an analyst who covers Palm and the mobile computing market for industry research firm IDC.

Nelson raised the idea of a possible sale in a letter to Palm's board late last month. Essentially, he argued that Palm had hit its peak in the market for smartphones, which are mobile devices that add computing functions, such as the ability to send email and edit documents, to standard voice-calling capabilities. (Nelson and a Palm representative did not return calls seeking comment.)

Although the company got its start making the Palm Pilot line of personal digital assistants, Palm has transformed itself into a handset maker. In the company's most recent quarter, for instance, sales of its Treo smartphone line accounted for about 61% of revenue, up from 39% in the same period a year earlier.