Palm, which makes the Pre and Pixi phones, is working with Goldman Sachs Group and Qatalyst Partners to find a buyer, Bloomberg News has reported.
Last year Palm introduced its WebOS operating system, which received positive media reviews but that failed to fuel sales.
The company shipped a total of 960,000 smartphones in the February quarter – but only 408,000 of those ended up in the hands of customers.
A Palm Europe spokesperson declined to comment on the reports that it is looking for a buyer.
But the company’s shares rose on the speculation.
The Smartphone market is dominated by Research in Motion’s BlackBerry smartphone and Apple’s iPhone. Google’s Android based devices have also grabbed a foothold in the market since they were launched last year.
Palm posted an operating loss of $265m (£172m) for the year to May 2009 as it struggled in the market.