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Handheld device makers Palm and Handspring both strongly denied on Tuesday that they are in merger talks, the day after rumors to the contrary pushed up the stock prices for both companies.

"It's not true. It's a rumor and we don't comment on rumors," said Lorraine Legros, Palm spokesperson in the company's Paris office.

"We aren't in talks to acquire Palm or to be acquired by Palm," said a Handspring spokesperson in the U.K. who asked not to be named.

Interest Reported

Talk of a merger between the personal digital assistant makers began Monday after a report in The Wall Street Journal, quoting "people familiar with the situation," said that merger talks were held between Palm and Handspring last year in a "war room" scenario. Though those particular merger talks were dropped--with both companies currently in the middle of restructuring plans and new products in development--the possibility of a merger cannot be dismissed, the newspaper report said.

The report also quoted various Wall Street money managers and analysts as hoping that the resignation of Palm's chief executive officer, Carl Yankowski, early in November could possibly pave the way for the company to merge with its rival.

By the end of Monday on the Nasdaq stock exchange, Palm (PALM) was up 44 cents, or 13 percent, to close at $3.87 per share, while Handspring (HAND) was up $1.41 or 35 percent, to close at $5.41 per share.

Rival Pressures

The two PDA manufacturers are facing increased challenge from Microsoft's Pocket PC handheld design. The software vendor designed the operating environment and licensed it to a number of hardware vendors. The partners, which include Compaq, Hewlett Packard, Toshiba, Casio, and others, jointly promote their wares.

Both Palm and Handspring use the Palm Operating System, although Handspring has added extensions that tailor the OS to its Visor and Treo PDAs. Advocates of both the Pocket PC and Palm OS are vying for application software developers to craft programs for their platforms. However, despite Microsoft's clout, the Palm OS seems to still draw interest among application vendors.