NEW YORK (AP) -- PalmSource Inc. shares slipped more than 9 percent in Monday trading after an analyst downgraded the company on concerns that its future sales could be decimated if sister firm palmOne Inc. begins making smartphones with Microsoft Corp.'s mobile operating system.

Needham & Co. analyst Charles Wolf said palmOne last month indicated that it may port the popular Treo smartphone -- currently run exclusively using PalmSource's Palm OS -- to Microsoft's Pocket PC software.
Although palmOne would continue selling Palm OS-powered Treos, the decision to support other systems serves as "a psychological blow because it could eliminate much of the upside in PalmSource's future financial performance," Wolf wrote in a research note.

Wolf lowered PalmSource to "Hold" from "Buy," saying he believes a formal decision from palmOne is "virtually certain." The stock plunged on Wolf's speculation, dropping 9.4 percent, or $2.10, to $20.32 on twice its average volume in afternoon Nasdaq trading.
SOURCE: Yahoo