Motorola, Palm merger could be doomed

Doubt was placed over Motorola 's rumoured takeover of Palm , this week, when the company told the stock market to prepare for a $1 billion loss in its first quarter financial results.

In the same week, it replaced its chief financial officer and named a new president and chief operating officer to boot. The changes saw the company's share price drop by 5.4 per cent as a result.

Motorola put the drop in profits down to its competitors lowering their handset prices faster than Motorola expected - prices Motorola chose not to compete with.

"The hardware side of Motorola will continue to haemorrhage margins," John Jackson, a wireless analyst with M:Metrics told News Factor .

Jackon also believes the Palm buy-out may now prove tricky for Motorola. He said Motorola's vision of an all-encompassing mobile technology company will be difficult and take longer than expected to realise.

Other analysts believe Motorola's struggles were linked to the company's continued flaunting of the Razr phone at a time when competitors were releasing brand new handsets.

Motorola has not denied the rumours that say it is interested in buying Palm and, despite today's news, an announcement by Palm is expected later this evening.

Cross your Palm with silver

However, Palm, too, has hit rough waters. Casey Ryan of analyst company Nollenberger Capital Partners in San Francisco told Network World : "While Palm is profitable and has increasing sales it faces tough competition and has stumbled recently.

"It has sold fewer devices than analysts expected in recent quarters, in part because of delays in getting products out."

Though Palm now earns its money from Windows Mobile , Palm OS PDA and smartphone devices, it's struggled to compete with a multitude of handsets at the lower end of the market.

By contrast, Motorola has not performed as well as its rivals, such as Nokia, in the smartphone market. It released the Symbian A1000 over a year ago and recently announced the Z8 at 3GSM .

Another reason mentioned for Motorola's interest in Palm is its close tie to Microsoft . Motorola has dabbled with Microsoft's Windows Mobile devices in the past - the MPx220 and the often-delayed MotoQ - so it surely is looking to benefit from Palm's expertise.