Matchmakers' Hands Full With Palm

However, it seems that an argument exists for why all of these potential suitors would avoid an acquisition. For one thing, with a market capitalization of $1.8 billion, Palm is likely too expensive for most ODMs or other companies, for that matter, says one portfolio manager who asked not to be named.

"There aren't too many companies that can pay $2 billion for a company. That's a big transaction," says the portfolio manager, whose firm is long Palm.

Likewise, says the portfolio manager, Dell wouldn't make a good fit, because it does best in already-commoditized industries where it can buy standardized parts and supplies. In contrast, the smartphone business, for now, still requires a lot of research and development, which isn't Dell's forte.

Other potential partners have problems. An acquisition from a network provider such as Cingular would likely lead to other network providers such as Verizon Wireless, owned by Verizon and Vodaphone , ceasing sales of Palm's Treo.

Meanwhile, Nokia, Motorola and H-P each have sufficient resources to improve upon their own smartphone efforts.

"It probably would be cheaper for them to work on their own game and get it right than to go out and buy Palm," says Pyle.

And what about Apple, which Nelson called a potentially "ideal" match for Palm? Ken Dulaney, who covers the handheld computing market for industry research firm Gartner, doesn't see it. What Palm needs to help it survive the coming trends in the smartphone market, Dulaney says, is a partner with expertise in manufacturing handsets and access to low-cost handset parts. And that's not Apple.

An acquisition by Apple "would be disaster," Dulaney says.

So, where does that leave Palm? The portfolio manager argues that the company should focus on its business. Ironically, what will make Palm more attractive is continued success on its own. "The best way for it to increase shareholder value is just to execute," the portfolio manager says.

>To order reprints of this article, click here: Reprints