HP buys Palm for $1.2 billion
Palm users, you can stop worrying about your smartphone vendor's imminent demise: Hewlett-Packard just announced a deal to acquire the company for $1.2 billion.
The move, briefly heralded on Palm's blog and announced in an HP press release, surprised a lot of people in the tech business. It's not the buyer or the price many observers had guessed. And although HP has been shipping Windows-based mobile devices since 1998, this purchase looks like a vote of no confidence in Microsoft's troubled smartphone efforts.
Palo Alto, Calif.-based HP sees two major benefits to buying its Sunnyvale neighbor, as outlined in a 12-page PowerPoint presentation (PDF). It gets Palm's webOS, an innovative and under-appreciated smartphone operating system that it can also use on tablet and slate computers, and it obtains Palm's extensive library of patents.
An acquisition by HP does not guarantee success, as its purchase of Compaq showed. But HP does have things Palm needed to get some momentum behind its Pre, Pixi and future webOS-based phones: money and marketing resources.
Altimeter Group analyst Michael Gartenberg gave the combination a thumbs-up on his blog for those reasons. He also noted the numerous Palm veterans now working at HP--including former Palm chief executive Todd Bradley--writing that "there should be a relatively smooth transition and overall good cultural fit."
In a quick phone conversation, Gartenberg added that by buying Palm instead of adopting Google's Android software, HP would have its own distinctive smartphone platform--a hardware-plus-software formula that's worked well for Apple and Research in Motion.
NPD Group analyst Ross Rubin made a similar point in a blog post. Rubin wrote that HP would have hard time differentiating phones running Microsoft's upcoming Windows Phone 7 software ("a dilemma from its PC business that it likely had no desire to repeat in the handset space").
Former Palm senior executive Michael Mace, who last week pronounced Palm "failed," blogged that "it could have been worse" but worried that HP could botch the deal later on: "if HP tries to 'help' the Palm folks execute, it will almost certainly drown them in process and bureaucracy."
What's your reaction to the news? Where do you see Palm in two years--a short paragraph in HP's Wikipedia entry, a respected alternative to the iPhone, Android and other mobile-device platforms or something in between?
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