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Sources: Morgan Stanley advising as Palm seeks buyer

Nokia seen as potential suitor for maker of Treo smart phone, but Palm's rising stock price poses challenges.

Investment bankers from Morgan Stanley are advising Palm on its options as the maker of the Treo smart phone seeks a buyer, according to several sources familiar with the situation.

Shares of Palm rose 11 percent on Friday to as high as $18.08, their highest level in eight months, on renewed speculation that leading mobile phone maker Nokia was eyeing the company.

A technology banker, who spoke on condition of anonymity, said on Friday there was potential interest from both strategic and private-equity buyers in bidding for Palm, and a separate banking source said the company was up for sale.

But the technology banker said the company's stock run-up made it more challenging for private equity to bid for the company versus strategic bidders, who have more opportunities to cut costs.

On Sunday, a third source told Reuters that Morgan Stanley was advising Palm on its options.

Shares of Palm have vaulted more than 25 percent this year, boosted by persistent rumors it is a takeover target. The rally has lifted Palm's market capitalization to about $1.7 billion, slightly more than total revenue in its last fiscal year, which ended in May 2006.

Palm has long been seen as as a target. Speculation increased last week when technology news Web site Unstrung said Nokia or a private equity firm may be the leading candidates to buy Palm at around $20 a share, citing unnamed sources.

Motorola, the No. 2 handset maker, has also been mentioned as a potential buyer for Sunnyvale, Calif.-based Palm, which makes personal digital assistants as well as a line of mobile phones that keep track of appointments, data and e-mail.

Morgan Stanley declined comment. Palm was not available for comment.