April 9, 2010 10:05 pm

Palm shares soar on HTC takeover rumours

Palm’s shares gained more than 10 per cent in trading on Friday, capping a volatile week in which the smartphone maker’s stock has moved sharply in response to a succession of takeover rumours.

The stock, which fell to a 52-week low of $3.65 last month after the company warned that sales of its Palm Pre and Palm Pixi smartphones were not meeting expectations, gained another 51 cents to $5.16 after unconfirmed newspaper reports that Taiwan’s HTC might be interested in acquiring the company.

Taiwan’s Economic Daily News said that HTC, the world’s fifth-largest smartphone maker, had ”opened discussions about an intent to acquire” Palm. Both HTC and Palm declined to comment on the report.

HTC has built its business on the basis of manufacturing advanced touch-screen smartphones based on Microsoft’s Windows Mobile operating system and, more recently, Google’s Android operating system. HTC made the G1, first Android-based handset, and also manufactures Google Nexus One smartphone.

A deal with Palm would give HTC access to Palm’s rival WebOS operating system, which was launched last year along with the Palm Pre handset and has been generally well received.

The new operating system and handsets have been a key part of Palm’s turnaround plan executed by a new management team led by Jon Rubinstein, the former Apple executive who is now Palm’s chief executive.

Palm, which has been struggling for several years in the face of growing competition in the smartphone market, has long been considered a potential takeover target.

However speculation about the company’s viability grew in the wake of recent quarterly results and disappointing sales forecasts which Mr Rubinstein has referred to as a “speed bump’.

Earlier this week Palm’s shares gained on short-covering after unconfirmed market rumours that Lenovo, the Chinese PC maker, might also be a potential bidder for Palm.

In the past 6 months, Palm’s stock has tumbled nearly 70 per cent, cutting its market capitalisation to about $780m from $2.4bn, although analysts believe a suitor would have to pay at least $1bn to acquire the company.

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