March 21, 2007 / 6:02 PM / 13 years ago

Palm takeover interest continues: sources

NEW YORK (Reuters) - Palm Inc., maker of Treo smartphones and handheld devices, continues to gather takeover interest although an imminent deal is seen unlikely, several sources familiar with the matter said on Wednesday.

Earlier in March, sources told Reuters that Palm hired Morgan Stanley to pursue a buyer. Speculation has intensified in recent weeks over possible bidders, and CNBC and technology news Web site Unstrung.com separately reported a deal could be announced as early as Thursday.

However, several sources familiar with the situation told Reuters on Wednesday that any deal announcement tomorrow — when Palm is scheduled to report quarter earnings — would be very surprising.

It was not clear how many bidders were interested in Palm, although one source said Motorola Inc. was eyeing it.

CNBC reported earlier on Wednesday that a major Palm shareholder expects Motorola to announce a deal to acquire Palm for about $2 billion as soon as Thursday. CNBC said the shareholder did not want to be identified.

But Motorola cut its outlook after the closing bell and one analyst said that meant it was unlikely to buy Palm.

“Unless you can make a compelling case to how Palm’s going to help you revamp the core handset business, it would be daylight madness to buy them now,” said Charter Equity analyst Ed Snyder.

Motorola warned that it would post a first-quarter loss and cut its forecast for revenue to far below Wall Street expectations, citing weaker-than-expected mobile phone sales. It gave no information about Palm.

Palm shares, which have risen in recent weeks on acquisition rumors, rose 3.6 percent to $19.45 by the close of regular trading on Nasdaq. The stock fell to $19.20 in extended trading after Motorola’s warning.

Palm has long been seen as an acquisition target. But while the company has decades of experience in mobile device design, it is no longer seen as the most innovative gadget maker.

Unstrung.com on Monday quoted unidentified sources saying Motorola, Nokia, and private equity firms Texas Pacific Group and Silver Lake Partners could be potential bidders for Palm.

Palm said it does not comment on rumor or speculation.

Additional reporting by Franklin Paul and Sinead Carew

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