Another snag is that Verizon wants VCast, its applications and mobile media download service, to be featured heavily on its phones. This is in direct conflict with Palm's app store, according to these sources.
And another factor working against Palm is that Verizon wants to focus its support behind new phones from Research In Motion (RIMM) and Motorola's (MOT) Google (GOOG - Get Report) Android effort, says one person who is familiar with Verizon's product road map. The thinking is that Verizon isn't eager to tie up its resources to accommodate Palm's WebOS software.
Palm shares fell 80 cents, or 4.7%, to close at $16.16 on Thursday. The stock fell another 26 cents in after-hours trading. Verizon shares rose 27 cents to close at $30.15, and dipped slightly after hours.
-- Written by Scott Moritz in New York.