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HP to buy Palm for $1.2 billion

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 HP Palm 29th April 2010

HP has agreed to buy Palm in a deal that values Palm at $1.2 billion.

We said at the start of the year that Palm's future was doubtful due to poor sales, and that we couldn't think of a rival manufacturer who would have space for Palm's product portfolio in their range. However, we wanted to be proven wrong and this HP-Palm tie-up shows that there is real interest in this company.

HP is hardly an obvious choice as a buyer, although HP are a mobile phone manufacturer with a range of very competent Windows Mobile based iPAQ handsets.. but unfortunately it is a range that has made little market impact, based on a platform that has been in steady decline lately.

The real prize with Palm is not the Pre or Pixi phones, but the WebOS operating system that Palm painstakingly developed over the past few years. WebOS is an excellent platform when it comes to usability, but it lacks applications and Palm's own devices lack consumer appeal against iPhone class competition.

 Palm Pixi With proper funding for development, HP and Palm could extend the WebOS platform to a wide range of handhelds, tablets and embedded devices. However, HP's motivation may well be to compete with rivals Apple and a newly emergent Dell in the smartphone market head on.

$1.2 billion seems like a high price for a firm that lost over $700 million last year and which probably had less than 12 months before the money ran out completely. That sort of loss would cause a small but noticeable dent in HP's $9.4b of operating income last year, but something that would be easily sustainable for the company. HP's shares dipped just 1% after news of the acquisition, so presumably investors are not too concerned.

Palm's corporate history is exceptionally complicated, but the HP deal does bring Palm back under the same roof as 3Com, recently bought by HP, who owned Palm in the late 1990s.

HP and Palm say that they expect the deal to close by the end of Q3 2010 and that Palm's current CEO Jon Rubinstein is expected to remain with the company.


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