After emerging as one of the top buy-out candidates one week ago, Taiwanese handset maker HTC is reportedly now passing on the opportunity to buy Palm (NSDQ: PALM).

Reports now indicate that the leading candidate is Lenovo, however, there’s questions as to whether the computer-maker would want to spend more than half its cash on the fledgling company. With no firm offer on the table, pundits are grasping at other straws. How about Dell, HP, or Intel? (NSDQ: INTC) Maybe Nokia? (NYSE: NOK)

Now is the time for Palm, which reportedly hired investment bankers and put itself up for sale last week, to consider a back-up plan. Clearly, it hasn’t gotten a solid or realistic offer yet. As a publicly traded company, it would have to bring an offer to the board if one came along. Palm’s CEO Jon Rubinstein declined to confirm to MarketWatch yesterday whether the company is indeed being shopped around.

In the same MarketWatch interview yesterday, Rubinstein was bullish about the prospects of keeping Palm an independent company, and despite dwindling cash reserves, he said they had no plans to raise additional capital. “We’re planning on sticking around. We want to broaden our distribution and our footprint in Europe,” Rubinstein commented. “I think one of the things that investors should think about is that we provide real differentiation in a very crowded market.”

So, if all buy-out candidates fall through, what could Palm do? Palm could extend its distribution, increase revenues and marketing power if it considered licensing webOS to other hardware vendors. The model could be similar to Microsoft’s, which lets dozens of handset manufacturers license its Windows Mobile operating system for their hardware. It would also be similar to the Android OS, however, Google (NSDQ: GOOG) does not charge for the software. To date, Palm has developed both all the hardware and software for its handsets, which is costly and time consuming. Palm’s capacity to develop more devices going forward will be seriously constrained by its cash balance. With partners, it could extend the webOS brand to more phones, and even other emerging devices, like tablets or e-readers. In the MarketWatch interview, Rubinstein called the idea “an interesting concept” and said Palm may be willing to do so, if the “right strategic partner came along with the right kind of business model.”

Most of the buy-out candidates listed, including HTC, Dell and Lenovo, currently use either Windows Mobile or Android, or both.

Reuters reported today that its sources said HTC decided to pass on buying Palm after reviewing the company’s books. Huawei also declined to bid. With HTC’s departure, Lenovo became the leading candidate. Lu Chialin, an analyst at Macquarie Securities in Taipei, said: “They’ve got a lot more free cash and don’t have the brand presence in the United States, so that will all give them that boost they need.”