Deal Talk Moves Dell, Palm, Sprint, Qwest

Tech chatter turned this week to possible deals, with analysts and investors trying to pick logical targets.

The top deal candidates this week are Dell (DELL Quote) and Palm (PALM Quote). Palm delivered its Pre phone last weekend and, more important, the company's WebOS software, which looks to be a viable contender in the still-unfolding smartphone operating system market.

Stuck in a rut with slumping PC sales, Dell has talked about exploring deals for months, but this week CEO Michael Dell indicated he expects to make an "significant-sized" acquisition, according to reports. To Wall Street observers, Palm's smartphone rebirth and its tenuous financial structure suggest a ripe takeout candidate. Palm shares jumped 12% Thursday on Dell deal chatter.

On Friday, analysts at Collins Stewart issued a note to clients saying Dell needs a foothold in smartphones and Palm needs size to compete with Nokia(NOK Quote), Apple(AAPL Quote) and Research In Motion(RIMM Quote). The note also estimates that Dell has the $3 billion in cash it would need to pull off the deal.

It's worth noting that there has been long-running speculation that No. 1 PC shop Hewlett-Packard(HPQ Quote), with its ample cash, would also find Palm a good fit. But there has been nothing to report on that front.

Sprint and Qwest

Another familiar potential deal that simmers and cools on the M&A stove is now simmering again: Sprint (S Quote) and Qwest Communications (Q Quote) exploring a long distance joint venture. Qwest's recent inability to sell its national fiber-optic network has reopened the possibility that the Rocky Mountain telco could combine the unit with Sprint's so-called long haul business.