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Investor calls on Palm to sell out

The Treo would be in better hands if Palm's board sold the company to a large IT vendor, major stock holder says.

A major investor in Palm called on the company this week to seek a buyer among the large IT companies of the world, arguing that competitive pressures will lead to tough times for the Treo seller.

Mark Nelson, the founder and former CEO of Ovid Technologies, owns 8 percent of Palm's stock, according to a filing with the Securities and Exchange Commission. In a letter to Palm's board of directors, Nelson urged Palm to consider selling its business to a company like Research in Motion, Dell or Hewlett-Packard while its fortunes are still on the rise.

Palm is in the midst of breaking away from the PDAs (personal digital assistants) that launched it to prominence in the 1990s. With sales of those devices plummeting, Palm and the rest of the PDA industry has embraced smart phones that combine the contacts, calendars and applications of a PDA with the ability to make voice calls and access data over the Internet. Palm's Treo devices have attracted a significant following within the U.S.

But many larger companies are also devoting their resources toward building smart phones, and Palm will have difficulty competing against deep-pocketed rivals like Dell and HP, Nelson wrote. Those larger companies plow more money into research and development and have better relationships with end customers than Palm, which relies on carriers to sell its Treo devices, he told the board. HP has developed several generations of its iPaq Mobile Messenger devices, but Dell has yet to enter the market.

A Palm representative declined to comment on the letter. But Todd Kort, an analyst at Gartner, suggested that Palm's independence might be exactly what helps it compete in the fickle market for smart phones. "They're faster on their feet; they can turn on a dime a little faster than Nokia can," Kort said.

Nokia's smart phones are much more popular in Europe than the Treo. But Nokia works on hundreds of designs in a year, while Palm's product development efforts are much smaller, Kort said. That small size allows Palm to be more sensitive to quickly changing market trends and to go after high-end customers, he said.