Rumours are circulating that Chinese company, Lenovo, is set to buy out struggling US phone company Palm.

According to CNBC, hedge fund investors triggered a stock rush overnight in the USA with speculation that Palm, which has recently suffered lower-than-projected sales and poor quarter earnings, may be taken over by PC maker Lenovo.

Analysts claim that a drop in Palm’s stock prices makes it an appealing takeover prospect for other companies as well.

It is not known whether Lenovo would actually use webOS itself on phones, netbooks and a slate similar to the iPad, or simply use Palm’s mobile experience to its own advantage for existing plans.

Lenovo’s purchase of Palm could boost its penetration of the smartphone market, which it is itself trying to enter with Android-powered devices such as the LePhone. The device is expected to sport a 1GHz Qualcomm Snapdragon processor, a 3-megapixel camera, GPS and Wi-Fi, along with a touchscreen and hardware QWERTY keyboard. It is expected to arrive in China during the first half of this year.