Handspring's Big Day Ruined by Palm

Updated from 2:45 p.m. ET

Handspring (HAND Quote) got a boost Tuesday after announcing a plan to resell its Visor handheld devices, enabling the company to attempt to gain a much-needed foothold in the enterprise market.

Its stock closed up $3.38, or 26%, at $16.19. But in after-hours trading, the stock was hammered after competitor Palm (PALM Quote) said it's seeing weak demand. On Island, Handspring was trading at $12.75 recently.

The second-largest maker of handheld devices behind Palm struck a deal with wholesaler Ingram Micro (IM Quote), which will offer Handspring products to resellers and value-added resellers. The resellers, in turn, will market and sell those products to enterprises, or large corporations.

This deal "stakes out space for them [Handspring] in the enterprise market," says Thomas Carpenter, an analyst at regional brokerage Hilliard Lyons. (He rates Handspring a hold, and his firm has done no underwriting for the company.)

It's important that Handspring target that market, especially because Research in Motion (RIMM Quote), maker of the popular BlackBerry pager, is already the clear leader there. Also Palm is making increasingly greater inroads, with its latest move an agreement earlier this month to buy Extended Systems (XTND Quote).

However, RIM and Palm lately have been punished for their presence in the enterprise market, with analysts concerned that the economic slowdown in the U.S. and a pullback in spending by corporations will hurt their sales.

Nevertheless, when Handspring reported its fiscal second-quarter numbers in January, it hinted at a strategy to target large corporations. A first step came the month before, when the company bought Bluelark Systems, which provides enhanced Internet access for handheld computers, a useful feature for business customers.