Palm Looking To Chinese Market For A Buyout

The once powerful mobile phone company, Palm has been trying to work a deal out with Huawei, an Asian Pacific company to try to get out of it’s current situation. Palm contacted Huawei’s investment bank in mid-February for “preliminary discussions,” a source mentioned, speaking on condition of anonymity since no process has been made public. Discussions have not made any progress since then though. The company recently mentioned in a statement that: “As a matte of policy, Huawei does not comment onspeculation about possible mergers or acquisitions. Huawei is always open to consider opportunities that will further enhance its business development.”

Palm has hired bankers to help explore several options, including a sale of the company whose smartphones have suffered against Apple’s iPhone and Research in Motion’s BlackBerry. Shares of Palm have jumped up more than 55% in the past week on speculation about a potential sale of the company.But the stock fell 11 percent to $5.33 after analysts suggested the rally made the company too pricey. "We remain concerned that it may be a 'take-under,' meaning a price that is below its current share price," Kaufman Bros analyst Shaw Wu said in a note. "This is due to Palm's large operating losses and likelihood that operating expenses remain high due to investment required to stay competitive in the smartphone space."

Palm has been considered a target for larger companies hoping to enter or expand in the mobile market for years. Analysts view ZTE Corp, China's number 2 telecommunications equipment maker, as another possible suitor. "Huawei and ZTE are potential buyers. It makes sense: they don't have an operating system or a brand, but they have cheap manufacturing costs and money to invest and develop the brand," said IDC analyst Francisco Jeronimo in London. "Consumers don't associate Chinese brands with quality products and don't pay a premium for such a mobile phone ... Palm would be perfect for them." Huawei and ZTE are two of China's biggest success stories, banking on demand from a strong domestic market and growing success overseas, where they compete with the likes of Ericsson and Nokia Siemens Networks.

Huawei and ZTE are not alone as potential Palm suitors; other companies on the list include Lenovo, HTC, and Dell. Who do you think will purchase Palm? Share your thoughts and comments below.