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Analyst: Dell Should Buy Palm

NEW YORK (AP) ¿ Dell Inc., the personal computer maker, has signaled that it will be looking for acquisitions. One analyst thinks Palm Inc., with its new Pre smart phone, would be a good target.

A Dell acquisition of Palm would "be born of mutual necessity and represent a strategic fit for both parties," Collins Stewart analyst Ashok Kumar told investors in a note Friday.

Kumar presents no evidence Dell or Palm have expressed any interest in such a deal. But he makes the case for it.

With the recession cutting into technology spending by both businesses and consumers, Round Rock, Texas-based Dell is seen as overly reliant on its PC business.

Kumar said buying Palm, a Sunnyvale, Calif. company, would put Dell in position to get in on the "land grab" in the smart-phone market. Kumar said Palm will need to capture 2 percent to 3 percent of the smart phone market by 2010 to stay a relevant player alongside Apple Inc.'s iPhone and Research in Motion Ltd.'s BlackBerry.

"Or stated differently, Palm would have to scale up from 50,000 units in the May quarter to 1.5 million units four quarters out," he said, adding, "Palm does not have the balance sheet ... to go through an extended period of cash burn."

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