Palm share rise fueled by merger chatter

NEW YORK (Reuters) - Palm Inc. (PALM.O) shares rose to a 4-month high on Thursday amid chatter the maker of the Treo phone might be a takeover target.

Palm shares rose to close at $16.45, up $1.06, or about 7 percent on Nasdaq. Earlier the stock rose to $16.55, its highest since October.

"Palm is active on renewed takeover chatter. Today, speculation is that Motorola is eyeing the company," said Frederic Ruffy, options analyst at Optionetics, an options education firm in Calif.

A Motorola Inc. (MOT.N) representative said it was the company's policy not to comment on rumors. Palm representatives were not immediately available for comment.

Palm's Treo is popular in the corporate community among users who need mobile access to email and data and it competes with Research In Motion's (RIM.TO) Blackberry.

"The strength today in Palm shares is being attributed to rumors ... that Motorola could make a bid for them," said William Lefkowitz, options strategist at vFinance Investments, brokerage firm in New York.

By contrast, Treo's are dwarfed by sales of other handsets. Palm shipped 2.3 million Treos in the fiscal year that ended June 2, 2006, while Motorola shipped 66 million handsets in the fourth quarter ended in December.

(Additional Reporting by Sinead Carew in New York and Doris

Frankel in Chicago)