The source confirmed parts of a report from industry tracker OTR Global that Palm has suspended production of its namesake smartphone, although not for the entire month of February as the OTR report said.
Chinese New Year begins on February 14 and celebrations continue for two weeks.
Palm said it regularly adjusts its product manufacturing to manage inventory.
In anticipation of the Verizon Wireless launch and Chinese New Year, we increased production levels prior to February, and anticipate ramping production back up after the Chinese New Year ends, the company said in a statement.
The news comes on the heels of the company's debut on top U.S. mobile carrier Verizon Wireless, a joint venture between Vodafone and Verizon Communications.
Until recently, the company's newest class of smartphones were only available on Sprint Nextel Corp, the No. 3 U.S. wireless service provider, and Palm has been losing market share to Apple's iPhone and other rivals.
Verizon declined to comment about Palm's production schedule.
Shares of Palm closed up 1 cent at $9.62 on Nasdaq after dipping nearly 4 percent on the production concerns sparked by the OTR report.
(Reporting by Ian Sherr; Additional reporting by Ritsuko Ando; Editing by Richard Chang and Tim Dobbyn)