The time may indeed be right for

Palm's

(PALM)

management and board to try to sell the company, as the smartphone maker's leading individual investor suggested recently.

But the key question is whether the company can find any takers. And many analysts and investors have their doubts.

Some of the same factors that investor Mark Nelson cited as reasons to explore a sale -- Palm's relatively high valuation, growing competition in the company's most important market and the risk of commoditization -- are the very same reasons why few, if any, companies might want to buy Palm.

"I don't put much credence in

Nelson's call for a sale of the company," says Doug Pyle, a U.S. Trust portfolio manager, whose fund is long Palm. "It doesn't seem to work. I don't know who would want to be on the other end."

Others are more confident that Palm could find a buyer -- at the right price. But there seems to be little consensus about what company might make a good merger match.

"It is somewhat of a challenge," acknowledged David Linsalata, an analyst who covers Palm and the mobile computing market for industry research firm IDC.

Nelson

raised the idea of a possible sale in a letter to Palm's board late last month. Essentially, he argued that Palm had hit its peak in the market for smartphones, which are mobile devices that add computing functions, such as the ability to send email and edit documents, to standard voice-calling capabilities. (Nelson and a Palm representative did not return calls seeking comment.)

Although the company got its start making the Palm Pilot line of personal digital assistants, Palm has transformed itself into a handset maker. In the company's most recent quarter, for instance, sales of its Treo smartphone line accounted for about 61% of revenue, up from 39% in the same period a year earlier.

But with big players such as

Nokia

(NOK) - Get Report

,

Motorola

(MOT)

and potentially

Apple Computer

(AAPL) - Get Report

moving into the smartphone market, Palm runs the risk of eventually having to compete on price on the low end and incremental features on the high end. Nelson believes the company doesn't have the financial resources to do either.

"It's a valid argument that Palm may not be able make it alone," says Scott Rothbort, president of LakeView Asset Management and a contributor to

TheStreet.com's

sister site

Street Insight

. "It needs to partner up or sell itself," adds Rothbort, who does not currently have a position in Palm, but follows the stock and has held it in the past.

Nelson suggested that a number of companies might be interested in acquiring Palm, including Apple,

Dell

(DELL) - Get Report

or

Research In Motion

(RIMM)

. Other analysts have ideas about who might make a good fit.

Rothbort, for instance, believes

Cingular Wireless

, the mobile phone network provider co-owned by

AT&T

(T) - Get Report

and

BellSouth

(BLS)

could be a potential acquirer of Palm. By marrying Palm's hardware with its own software and network service, Cingular could offer a whole package to customers and presumably cut costs.

"Net net, it could be a winner," he says.

Whoever might be interested will have to figure out what to do with Palm's handheld business. Linsalata believes the list of potential acquirers for Palm can be narrowed down to companies that already compete in the space who might want to shore up or establish a smartphone line. Companies that might fall into that category are Dell and

Hewlett-Packard

(HPQ) - Get Report

.

Linsalata says Palm might also see interest from some original device makers (ODMs) -- typically, overseas firms that manufacture computer equipment on behalf of American and other companies who then place their own brands on them. They might want to gain the profit margins from having their own brands, and Palm could be a way of gaining an established name, Linsalata says.

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

(VZ) - Get Report

and

Vodaphone

(VOD) - Get Report

, 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.