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Palm Keeps It Close

The company meets analysts and investors but doesn't talk takeover.



continues to keep mum on the information that investors want to know the most.

At the company's analyst and investor day held Tuesday in New York, Palm offered no comment on the frenzied takeover speculation that has plagued the company in the last few weeks, nor did it offer any information on new product launches or its strategy to remain a viable, standalone smartphone maker.

Instead the Sunnyvale, Calif.,-based company chose to focus on the fast-growing smartphone market and Palm's move to launch a version of its operating system using the core of the Linux open-source platform.

Shares of Palm were recently off 43 cents, or 2.5%, to $16.77.

Palm's stock has

soared nearly 36% in the last two months on buzz that the company could be negotiating a buyout either with private equity firms or with

other handset makers such as


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Palm has declined to comment on the buzz in the past, and the company stuck to its stance on Tuesday.

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"It seems like Palm doesn't want to jeopardize any negotiations it may have had or fuel additional speculation," said Carmi Levy, senior research analyst with Info-tech Research Group. "So its strategy is 'say nothing.'"

Instead, Palm CEO Ed Colligan said the company plans to win more customers and successfully move from a handset maker to a smartphone player, but he didn't reveal details on new products.

Palm started as a PDA maker of handheld devices that combined a mobile phone with basic computing functions that could be accessed using a pen or a stylus.

But in the last few years, the company has moved toward smartphones -- converged devices with a keyboard that can support advanced computing applications and multimedia features such as a camera. Nearly 85% of Palm's revenue last quarter came from smartphones.

"We have seen amazing growth in the smartphone segment," said Colligan. "At the same time, we have managed our traditional handheld business to be profitable, and our main goal there is to ensure it continues to contribute to margins." Palm's smarpthone revenue has increased 650% since fiscal 2004.

Palm said it plans to get net margins up from the current 5.6% to between 7% to 7.5% in three to five years.

But the company faces increased competition that could add to pricing pressure. The company has to be struggling to draw more business customers, while rival BlackBerry maker

Research In Motion


remains strong.

Also looming is


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iPhone, which is expected to debut in June.

Palm believes it can "peacefully co-exist" with the iPhone.

"We see it different from the space where people are buying our products today," said Colligan. "The iPhone is a consumer product aimed at entertainment and priced really high. And we don't think it will do well with small business as it has no real keyboard."

That may be true, except Colligan is discounting the "psychological impact" of the iPhone, says Levy. "The iPhone has cast a strong halo over the entire market," he says. "Though it doesn't compete against the Treo, it will draw consumer attention away from Palm and any products it launches this year."

Meanwhile, those looking for a hint about the long-speculated "third line of business" were also in for a disappointment.

Palm co-founder Jeff Hawkins has been rumored to be working on a secret project that has been the subject of much discussion among Palm enthusiasts. Hawkins has earlier hinted in interviews that it could be released by the end of the year.

That could be nothing more than speculation, says Levy. Palm didn't make any mention of it during the meeting and has never offered any details on the project.

"At some point you have to deliver on your promises," says Levy. "If Palm had a real viable new business to talk about we would have heard about it by now, and until it delivers I would give no credence to any speculation around the company's activities."