March 5, 2007 / 4:38 AM / 13 years ago

Palm working with Morgan Stanley on options: source

NEW YORK (Reuters) - Treo smartphone maker Palm Inc. PALM.O is working with investment bank Morgan Stanley (MS.N) on examining various strategic options for the company, a source familiar with the situation said on Sunday.

Shares of Palm rose 11 percent on Friday to as high as $18.08, their highest level in eight months, on renewed speculation that leading mobile phone maker Nokia NOK1V.HE was eyeing the company.

One technology banker who spoke on condition of anonymity said on Friday there was potential interest from both strategic and private equity buyers in bidding for Palm.

But the banker said the company’s stock run-up made it more challenging for private equity to bid for the company versus strategic bidders, who have more opportunities to cut costs.

A separate banking source on Friday told Reuters that the company was being shopped around.

Shares of Palm have vaulted more than 25 percent this year, boosted by persistent rumors it is a takeover target. The rally has lifted Palm’s market capitalization to about $1.7 billion, slightly more than total revenue in its last fiscal year, which ended in May 2006.

Palm has long been tossed around as a target. Speculation increased last week when technology news Web site Unstrung said Nokia or a private equity firm may be the leading candidates to buy Palm at around $20 a share, citing unnamed sources.

Motorola Inc. MOT.N, the No. 2 handset maker, has also been mentioned as a potential buyer for Sunnyvale, Calif.-based Palm, which makes personal digital assistants as well as a line of mobile phones that keep track of appointments, data and e-mail.

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

Additional reporting by Franklin Paul and Sinead Carew

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