Palm terrified them.

Palm apps were tiny, took trivial resources, and could provide a lot of what was done with new apps on Android. Dictionaries, calculators, games (I played monopoly on a Treo, it looked great). I watched Mp4 movies on a Treo.

Imagine Android with a Palm Subsystem so all those old Palm apps could run. It would’ve majorly slowed Android app adoption, perhaps even giving enough support to allow PalmOS architecture to develop into a competitor to Android.