Why did HP “Acquire” Palm?

Palm CEO Jon Rubinstein said his company is not for sale. There were reports that HTC and Huawei have backed out from the bidding to acquire Palm, leaving Lenovo as the remaining company as the lone potential buyer. And what do you know? Its not HTC, its not Huawei and definitely its not Lenovo who acquired Palm but Hewlett Packard. Yes, HP bought Palm Inc. for $1.2 billion.

HP and Palm, Inc. announced that they have entered into a definitive agreement under which HP will purchase Palm, a provider of smartphones powered by the Palm webOS mobile operating system, at a price of $5.70 per share of Palm common stock in cash or an enterprise value of approximately $1.2 billion. The transaction has been approved by the HP and Palm boards of directors.

The combination of HP’s global scale and financial strength with Palm’s unparalleled webOS platform will enhance HP’s ability to participate more aggressively in the fast-growing, highly profitable smartphone and connected mobile device markets. Palm’s unique webOS will allow HP to take advantage of features such as true multitasking and always up-to-date information sharing across applications.

Under the terms of the merger agreement, Palm stockholders will receive $5.70 in cash for each share of Palm common stock that they hold at the closing of the merger. The merger consideration takes into account the updated guidance and other financial information being released by Palm this afternoon. The acquisition is subject to customary closing conditions, including the receipt of domestic and foreign regulatory approvals and the approval of Palm’s stockholders. The transaction is expected to close during HP’s third fiscal quarter ending July 31, 2010.

Palm’s chairman and CEO, Jon Rubinstein, is expected to remain with the company. So why did HP decided to acquire Palm? For a number of reasons I guess:

1. HP wants to have its own mobile platform via WebOS of Palm
2. HP perhaps wants to again try to compete in the mobile phone / smartphone space via Palm. Remember their iPaQ?
3. HP may want to create tablet PCs just like the iPad.

So what do I think about the acquisition? Well, it definitely saved the cash strapped Palm. But how about for HP?

For the mobile platform WebOS, my worries are this: a new iPhone will be released soon. The new BlackBerry OS will also be available soon and Microsoft will introduce the new version of its mobile platform (Windows Phone 7) within the year. So why should this be a concern for HP? Because acquisitions like this takes time to blend, which means it will take some time before a new device or product (from a combined HP / Palm) can be released or created.

How about applications? Apple iPhone Apps Store has around 150,000+ apps, Google’s Android Market has around 50,000, RIM’s Apps World has 6,500. How about Palm? It has around 2,000 apps. Now that’s a small number compared to that of the competition and will be difficult to catch up.

Technology wise? HP can bring in some of its technology to Palm, but how significant will this be? Let’s take a look at the camera angle, Palm Pre has a 3-megapixel shooter while the Pixi has 2MP. How about for the competition? 8- and 12-megapixel cameras.

All these are just opinions of mine. HP might have something up its sleeves which I don’t know. What I do know is HP should leave Palm alone in creating new products and strenghten its foothold in the mobile space.

Oh by the way, what do we call the new company? HPalm? Doesn’t sound right. I am logging off. Stay cool. God Bless!


Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: