Both sides of this story have refused to discuss the possible buyout at this point, but industry analyst Jack Gold said that "Dell was likely to introduce a smartphone later this year", and purchasing the infrastructure in place at Palm would streamline the process considerably.
I have no evidence for this rumor besides all the clatter and noise on the Web. The Dell, Palm rumors started the second Dell killed its PDA line, the Axim. Insiders have been predicting a Dell smartphone for the last four years.
Skeptics of this rumor claim that Dell is focusing on its core business and has no time for the wireless market. Supporters of a Dell, Palm deal, though, claim that Dell cannot afford to wait any longer if it hopes to win market share in the smartphone space.