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Palm shares rise as takeover rumor resurfaces

The new Palm Pre cellular phone can be seen in New York June 3, 2009. REUTERS/Lucas Jackson

NEW YORK/CHICAGO (Reuters) - Shares of Palm Inc rose 8 percent on Friday fueled by rumors that bigger rival phone maker Nokia may be eyeing the maker of the Pre and Pixi smartphones.

“Palm shares jumped and its call volume surged to 9 times their normal level as more than 80,000 call contracts traded by midday on renewed takeover speculation,” said Frederic Ruffy, option strategist at WhatsTrading.com, a Web information site.

Representatives for Palm and Nokia were not immediately available to comment after Palm shares rose 8.1 percent to $12.38 in active afternoon trading on Nasdaq.

Chatter about a combination of Palm and potential suitors has bubbled up from time to time for months. Ruffy said that in September, the speculation was that Nokia might bid for Palm -- but nothing ever happened and Palm shares have been down 30 percent since then.

“The same speculation has resurfaced this Friday, one week before November options expiration,” he added. “A lot of the activity is in the Palm November call options with some investors opening new positions expecting additional gains while others are closing out positions ahead of next Friday when they go off the board.”

Technology companies Dell Inc and Microsoft Corp and handset manufacturer Motorola have all been named as potential suitors.

In theory, owning Palm could bolster a company’s mobile presence and provide a challenge to Apple Inc’s iPhone and Research in Motion’s BlackBerry devices.

But many analysts have called such a deal unlikely, saying that any buyer would have to pay more than $2 billion, and then sink more in to marketing and distribution.

Rather than buy the company, Nokia could simply license Palm’s operating system technology for far less, some have said.

Reporting by Franklin Paul and Doris Frankel in Chicago; Editing by Tim Dobbyn

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