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Two most-likely suitors have been mentioned for the company, whose one-time dominance of the PDA market has slowly been eroded by competitors' Windows Mobile devices and RIM's BlackBerry handheld. One is an unnamed private equity group, the other a major competitor in the smartphone sector, Nokia.

However HP and Dell are also said to be interested, specifically in the wireless technology that underpins the Treo range.

One report says that Palm shareholders and management are divided over whether to pursue a full buyout or seek an investor prepared to provide a 'significant infusion of cash'.

'My sense

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is that they're eventually going to get out,' Unstrung's source said. 'Simply because a lot of other companies are so far ahead innovation-wise.'

The basic Treo design is several years old and as Gartner analyst Ken Dulaney noted, no longer compares favourably to newer devices such as Motorola's Q or Apple's forthcoming iPhone.

'If you were to take the Treo and put it next to some of the devices that have been launched, it looks like a brick,' he said.

While Palm has cash reserves of $500 million and a healthy cash flow, it does not have the resources to compete with bigger rivals like Nokia and Motorola. Its PDA business has faltered over the past few years with the growth of the Windows Mobile platform and the emergence of RIM. It released no new PDA models in 2006. Early this year discontinued the short-lived LifeDrive.

Palm declined to comment on 'speculation', perhaps wisely, because takeover rumours generally surface at least once or twice a year.