Potential buyers still eyeing Palm: source

By Megan Davies

NEW YORK (Reuters) - Palm Inc. (PALM.O) remains a potential takeover target, with at least one strategic buyer interested in taking over the maker of the Treo smartphone, a source familiar with the situation said on Tuesday.

Strategic bidders come from the same general industry as the company they are buying, as opposed to private equity and buyout firms which buy targets to spin them off a few years later.

Earlier in March, sources told Reuters that Palm hired Morgan Stanley to pursue a buyer.

Speculation intensified in recent weeks over possible bidders and came to a head a week ago when CNBC and technology news Web site Unstrung.com separately reported that a deal could be announced as early as last Thursday, with CNBC focusing on mobile phone maker Motorola Inc. (MOT.N) as a potential buyer.

However, late on Wednesday, Motorola cut its outlook, which led some analysts to conclude that the likelihood of it buying Palm had diminished.

Palm's stock has fallen about 6 percent since the close of trading on Wednesday, when an anticipated buyout of the firm failed to materialize. Its shares closed 9 cents lower at $18.35 on Tuesday.

Mobile phone makers Motorola Inc. (MOT.N) and Nokia (NOK1V.HE), and electronics makers Dell Inc. (DELL.O) and Hewlett-Packard Co. (HPQ.N) have all been speculated as companies possibly interested in Palm, while reports have also said that bids could come from private equity players.

The bidding process is now at the stage where interested parties conduct due diligence, the source said, referring to the review potential buyers conduct before acquiring a target.

Morgan Stanley declined comment. Palm was not immediately available for comment.