Motorola buys Palm to fend off Apple iPhone

Future of both companies at stake in $2 billion deal

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Motorola is so worried about the threat posed by Apple's iPhone that it's about to splurge $2 billion (£1 billion) on PDA maker Palm - or so claims a Palm shareholder.

"Apple is about to walk away with the OS market for handheld computers," the shareholder told CNBC. "Microsoft has been successful because it's always owned the OS. In some ways, the iPhone from Apple is a trojan horse, a handheld computer running the Mac OS that's poised to take over the world."

Motorola has fended off rival bids from Nokia and two private equity firms to seal the deal which will be announced tomorrow.

Motorola chief Ed Zander sees Palm as a way for his company to escape its price war with Nokia, giving the company the opportunity to move into mid- to high-end mobile devices. It will also help Motorola develop closer ties with Microsoft whose Windows Mobile operating system can be found in Palm devices like the Treo smartphone.

"If they [Motorola] own Palm, they're really the most substantial player running the Windows [Mobile] operating system," says the Palm shareholder. "Motorola could become a key Microsoft partner."

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