Report: Lenovo Front-Runner To Acquire Struggling Palm

Chad Berndtson

April 23, 2010, 10:39 AM EDT

According to Reuters, which on Friday quoted sources close to the situation as saying bids for Palm from other Asia-based vendors had petered out, Lenovo is indeed seriously investigating a Palm buy.

The rumors boosted Lenovo's stock on the Hong Kong market on Friday. Reuters further reported that HTC, which as recently as last week was considered a major contender to acquire Palm, passed on Palm after getting a peek at its financials. Another major Chinese player, Huawei, also declined to bid, Reuters said.

Palm's stock saw a pleasant spike the day after Bloomberg first reported the acquisition rumors earlier this month. But for the most part, the past year has been a story of frustration and disappointment for Palm, whose stock price as of mid-April was down more than 50 percent since January, and whose revenue forecast for the current quarter is less than half of what many Wall Street analysts were predicting.

It hasn't been for lack of trying, either. Palm's Sprint-carried Pre and Pixi phones, now both on Verizon as Palm Pre Plus and Palm Pixi Plus, were well-reviewed and also among Channelweb.com's 10 Coolest Smartphones of 2009. Palm's proprietary mobile operating system, webOS, has also been critically praised.

But neither the phones nor the OS could gain traction in a year dominated by iPhones and Google Android-based handsets, and slumping sales led to, as reported, Palm bringing in Qatalyst Partners and Goldman Sachs to advise on a possible sale.

Amid the acquisition discussions, Palm CEO Jon Rubinstein has been steadfast in his confidence in Palm's ability to turn things around. In early April, Rubinstein told Fortune that Palm "has a plan that carries the company forward." He reiterated those comments in a Thursday story in The Financial Times , and said Palm would look at offering webOS to other manufacturers, too.

But it was also the first print interview with Rubinstein this month where he acknowledged that Palm was entertaining takeover bids, even though he said he "believe[s] Palm can survive as an independent company."