Shares in Psion were boosted in mid-morning trade amid rumours that US rival Palm was weighing up a bid.
Palm was rumoured to be launching a takeover approach for Psion in order to gain control of Symbian, the mobile communications operating system joint venture in which Psion is the largest stakeholder.
Psion declined to comment on the rumour. But informed sources said the takeover talk was wide of the mark, not least because any deal would instantly devalue Palm's market value.
One source explained: "Palm would have to buy in paper. The trouble is, their paper is based on the company being valued as a software company.
"If Palm were to licence Symbian, it would say to the market that it is not a software company because it doesn't have a next generation operating system which is competitive."
The source also suggested a takeover of Psion would lead to problems over which company controls Symbian, with fellow shareholders Matsushita, Motorola and Nokia all seen as likely to contest any move by Palm.
Shortly after 11.30am, shares in Psion were up 12.75p at 276.75p on the London Stock Exchange, having fallen back from an earlier high of 290p when the rumours first emerged.