Palm put on the block with $2bn price tag

Palm, the manufacturer of handheld computers whose fortunes have slumped since BlackBerry cornered the corporate market, has put itself up for sale.

The company is using Morgan Stanley, the investment bank, to explore strategic options, which could include a takeover by the mobile phone giant Nokia, the computer manufacturer Dell, or a private-equity buyer.

Palm managers are believed to have been persuaded to abandon their go-it-alone strategy after Apple unveiled its forthcoming iPhone, which will ratchet up the competition in the mobile device market.

The Palm Treo smart phone - which combines mobile telephony with Palm's historic hand-held computer technology - has been holding its own in the consumer market against rivals made by Nokia and Motorola. Potential business-users, however, are addicted to their BlackBerrys, which are made by Palm's rival Research in Motion.

"As of now, Palm is profitable and I don't see why it is not a viable company," said Charlie Wolf, an analyst at Needham & Co, "but would it be better off if owned by a larger company? That's a tougher one to call. The iPhone is going to be a major competitor to the Treo when it starts to come down in price."

Palm shares have collapsed since their heyday at the start of the decade, when it focused on hand-held personal organisers. This market is still dominated by Palm, but sales have slumped and the company has focused on smartphones. Last year, frustrated with limp profit margins, rebel investors demanded that Palm put itself up for sale.

The stock was up more than 10 per cent last Friday as rumours of a takeover deal swirled around Wall Street, but they succumbed to profit-taking yesterday amid reports that private-equity suitors were struggling to justify a bid at the current price. At a market capitalisation of $2bn (£1.04bn), Palm may make a useful acquisition for Dell, which is reportedly looking at a way to crack the market.

Palm said it does not comment on market rumours.