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Verizon Wireless, the largest U.S. mobile-phone company, will start selling Apple Inc.’s iPhone next year, ending AT&T Inc.’s exclusive hold on the smartphone in the U.S., two people familiar with the plans said.

The device will be available to customers in January, according to the people, who declined to be named because the information isn’t public. Natalie Kerris, an Apple spokeswoman, and Jeffrey Nelson, a Verizon Wireless spokesman, declined to comment.

The iPhone, which has been the sole domain of rival AT&T in the U.S. since June 2007, will give Verizon a boost in its competition for smartphone customers, UBS AG analyst John Hodulik said in an interview. Verizon customers, who numbered 92.8 million at the end of the first quarter, may buy 3 million iPhones a quarter, he estimates.

“Apple is going to dramatically increase the number of devices it sells in the U.S. when exclusivity at AT&T ends,” said Hodulik, who is based in New York and rates Verizon shares “neutral.” “It’s hard to ignore the quality issues that AT&T has faced.”

Verizon Wireless, which is building a high-speed fourth- generation network, plans to unveil several devices that will run on the new technology in January at the Consumer Electronics Show, Chief Executive Officer Lowell McAdam has said.

IPhone Gains

Verizon Communications Inc., which co-owns the wireless company with Vodafone Group Plc, slid 9 cents to $28.62 in New York Stock Exchange composite trading at 4 p.m. AT&T fell 49 cents to $24.46. Apple, based in Cupertino, California, dropped $12.13 to $256.17 on the Nasdaq Stock Market.

Peter Thonis, a spokesman for Verizon Communications, and Mark Siegel, an AT&T spokesman, declined to comment. Tenille Kennedy, a spokeswoman for Research in Motion Ltd., didn’t return a call seeking comment.

The iPhone has helped AT&T add subscribers even as the U.S. mobile-phone market nears saturation. There are enough wireless devices for more than nine out of 10 people, according to the CTIA wireless industry association.

In the first three months of this year, about a third of AT&T’s iPhone activations came from customers who were new to the carrier. Without those 900,000 new subscribers, the company may have posted a loss in contract customers that quarter, analysts said.

Still, Dallas-based AT&T has battled customer complaints about its wireless service, especially in New York and San Francisco, and dedicated an extra $2 billion to upgrading its network this year.

BlackBerry, Android

For Apple, a partnership with Basking Ridge, New Jersey- based Verizon Wireless is a victory over rivals such as RIM and Motorola Inc., whose smartphones are currently promoted by the carrier.

“For Apple it means a larger addressable market,” said Andy Hargreaves, an analyst at Pacific Crest Securities in Portland, Oregon. “It’s also good news for Apple in that it will spread the load on the wireless data networks, which will be good for their customers.”

Motorola, which makes Droid phones that use Google Inc.’s Android operating system, fell 27 cents, or 3.8 percent, to $6.80 on the New York Stock Exchange. Google dropped $17.82, or 3.8 percent, to $454.26 on the Nasdaq. RIM, maker of the BlackBerry, declined $3.22, or 6.1 percent, to $49.75.

Apple has sold more than 50 million iPhones since the phone’s introduction in 2007. The latest version, iPhone 4, sold more than 1.7 million units in the first three days after its June 24 debut, a record for the product. Chief Executive Officer Steve Jobs said the company didn’t have enough supply to meet demand. Many stores, including retailer Best Buy Co., sold out.

A release at Verizon in the first quarter will help Apple’s sales in the U.S. grow to at least 15 million units next year from 11 million in 2010, Barclays Capital analysts said in a note today. The company’s suppliers have been ramping up production of components for a phone on Verizon’s CDMA network, according to the research report.

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Jon Callas, who as co-founder and chief technologist of PGP helped bring strong encryption to the masses, has taken a job with Apple working on operating-system security.

His move around the beginning of the year was confirmed by two of his long-time friends and this brief bio, which says Callas remains on PGP’s technical advisory board. He previously served as CTO and CISO of PGP Corporation since its founding in 2002.

Callas is the latest celebrity researcher to join Apple’s security team. Last month, former Mozilla security boss Window Snyder, credited with making Firefox’s security response more professional, took a job in Cupertino’s security department. And in May 2009, One Laptop Per Child’s top security architect, Ivan Krstic, signed on to Apple, with the title of “Security Samurai, Core OS.”

Callas didn’t respond to an email and phone call seeking details. His Linked profile lists his position as “Cryptographer at I Could Tell You But Then I’d Have To Kill You and Associates.” His move marks the second time he’s been employed at Apple, having worked as a “software developer and researcher focused on new networking and collaboration products” from 1995 to 1997, according to his resume (PDF).

The new gig is the latest stop on a 25-year journey that’s also included engineering and software architect positions at the now-defunct Digital Equipment, Counterpane Internet Security (now owned by BT), and Wave Systems. His biggest claim to fame was his involvement at PGP, which successfully marketed one of the first publicly available implementations of pubic key encryption, written by Phil Zimmermann.

In the 1990s, Callas served as chief scientist of PGP Inc., which was purchased in 1997 by Network Associates. In 2002, as PGP floundered under its new owners, he was instrumental in regaining the rights to the PGP technology and forming PGP Corporation, along with Phil Dunkelberger, who remains the company’s CEO.

“He’s quite a valuable guy,” Zimmermann told The Register. “He has good people skills and good perspectives on his craft, which is cryptography.” During much of his tenure, Zimmermann added, Callas focused on the generation, exchange and safe storage of cryptographic keys, a highly complex procedure generally referred to as key management.

Zimmermann and Bruce Schneier, founder of Counterpane, both confirmed Callas’s new job.

Callas’s precise responsibilities at Apple are unknown. Given his expertise in cryptography and his focus on OS security, it’s tempting to speculate he’s perfecting FileVault. The security feature built into Mac OS X encrypts only a user’s home directory, a shortcoming that allows snoops easy access to many sensitive files that by default are stored elsewhere. While at PGP, Callas oversaw development of software that encrypted Macs’ entire hard drive, according to this 2008 article from CNET’s Declan McCullagh.

But Callas has stressed that his work is by no means limited to encryption.

“I’m known primary these days as a cryptographer, but I did operating system security for a long time before I did cryptography,” he wrote in a 2009 blog post congratulating Apple on the hire of Krstic. “In my own mind, I’m an OS guy who has had a successful side project in crypto.”

He went on to share a bit about his approach for safely engineering new software features that ought to serve Apple well as it continues to bring new classes of devices to market.

“The classic problem with designing new OS concepts is ignoring what went before,” he wrote. “Any designer of new features and systems needs to answer the question, ‘What did MULTICS and VMS do?’ The best security of the past is rarely met by the present.” ®

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Palm Inc., creator of the Pre smartphone, is seeking bids for the company as early as this week, according to three people familiar with the situation.

The company is working with Goldman Sachs Group Inc. and Frank Quattrone’s Qatalyst Partners to find a buyer, said the people, who declined to be identified because a sale hasn’t been announced. Taiwan’s HTC Corp. and China’s Lenovo Group Ltd. have looked at the company and may make offers, said the people.

Palm, which helped pioneer the market for personal digital assistants, would offer suitors the WebOS software that competes against mobile operating systems from iPhone maker Apple Inc. and Google Inc. For Elevation Partners LP, the firm that owns about 30 percent of Palm, a sale may end the volatility of an investment in a stock that surged more than 10-fold since December 2008 before erasing most of the gain.

“Palm still has quite a good brand in the U.S. market, and some strong technology, so you can do something with it,” said Frank He, a technology analyst at BOC International Holdings Ltd. in Hong Kong. “The shares have gone down a lot and the company may become attractive to anyone looking for a turnaround play.”

The Sunnyvale, California-based device maker surged 32 percent last week on the Nasdaq Stock Market on renewed speculation of a takeover bid. Before the rally, the stock had plunged more than 60 percent this year, dragged down by disappointing sales of the Pre and Pixi phones.

Missing Estimates

Palm rose 11 percent to $5.16 on April 9 in Nasdaq Stock Market trading. The shares jumped as much as 9.4 percent in Europe today, trading 9 percent higher to the equivalent of $5.67 at 10:52 a.m. in Frankfurt.

Chief Financial Officer Doug Jeffries last month forecast sales in the quarter ending in May will be less than $150 million, compared with the $300 million average of analysts’ estimates compiled by Bloomberg at the time.

Palm, which has a market value of $870.8 million, ranked sixth in the North American smartphone market during the three months ended Dec. 31 with a 4.3 percent share, according to Gartner Inc. Research in Motion Ltd., maker of the BlackBerry, led with 44 percent, followed by Apple’s 24 percent, according to the Stamford, Connecticut-based research company.

Chief Executive Officer Jon Rubinstein, who developed Palm’s latest operating system, was counting on the Pre and Pixi smartphones to attract customers. The company has patents from mobile hardware to software and power-saving technologies.

Lenovo, Dell

Lynn Fox, a Palm spokeswoman, declined to comment. Qatalyst’s Sally Palmer and Goldman Sach’s Andrea Rachman didn’t immediately respond to requests for comment. Chen Hui-Ming, the chief financial officer of HTC, declined to confirm or deny the company’s interest in Palm.

Wong Wai Ming, Lenovo’s chief financial officer, also declined to comment on the company’s acquisition plans. In January, Lenovo paid $200 million to purchase Lenovo Mobile Communication Technology Ltd., letting it re-enter the market for handsets. The company had sold the mobile-phone unit in 2008 to focus on personal computers.

Palm shares have been buoyed in the past on speculation the company would be bought by Nokia Oyj. The Finnish company today declined to say if it might be interested.

“We never speculate or comment on market rumors,” said Arja Suominen, a Nokia spokeswoman.

Dell Inc. looked at Palm, though it decided against an offer, according to two of the people familiar with the matter. Jess Blackburn, a spokesman for the Round Rock, Texas-based computer maker, didn’t respond to a call for comment.

Burning Cash

Unlisted Huawei Technologies Co. and ZTE Corp., China’s two biggest makers of phone equipment, may be more likely bidders for Palm than HTC or Lenovo, said Lu Chia-lin, a technology analyst at Macquarie Group Ltd. in Taipei.

Chinese companies “have been quite eager to expand their international markets,” said Lu.

Palm may burn $80 million every three months for the next five quarters as competition in the smartphone market intensifies, Berenberg Bank analysts including Adnaan Ahmad wrote in a March 25 report. The company held $592 million in cash and short-term investments at the end of its fiscal third- quarter, according to the report.

Ross Gan, a spokesman at Huawei, said the company is always open to opportunities, though he declined to comment on speculation about mergers and acquisitions as a matter of policy. Margrete Ma, a ZTE spokeswoman, couldn’t immediately be reached for comment.

Market Pioneer

After Palm introduced the Pre at the Consumer Electronics Show in January 2009, the stock jumped 80 percent in two days to $5.96. By September, the shares had climbed as high as $17.46.

The stock then dropped 79 percent over the next six months as Palm’s sales growth was outpaced by marketing costs, and the company lost market share to Apple and phones equipped with Google’s Android. Palm has posted 11 straight quarterly losses.

Founded in 1992, Palm helped pioneer the market for handheld organizers with its PalmPilot devices. The company was acquired by U.S. Robotics, which was in turn purchased by 3Com Corp. 3Com spun off Palm in 2000.

Rubinstein joined the company after leading development of Apple’s best-selling iPod media player. He was recruited to Palm by Fred Anderson, Apple’s former finance chief and a co-founder of Elevation Partners.

The Pre was Palm’s first phone based on WebOS. It went on sale in June 2009, followed by the smaller, cheaper Pixi in November. The phones let users send e-mail, surf the Web, stream video and run multiple applications at the same time.

Both devices were sold in the U.S. exclusively by Sprint Nextel Corp., the country’s third-largest carrier, until Verizon Wireless began offering enhanced versions in January.

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