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HP to Acquire Palm for $1.2B

Wed, 04/28/2010 - 1:58pm
Monica Alleven

And Palm goes to ... HP, which today announced it will acquire Palm for about $1.2 billion. The transaction has the blessing of both companies' boards.

With the deal, Palm gains the financial strength and global scale that HP offers – not to mention more R&D and sales and marketing might – and HP fills out its portfolio in the smartphone category.

"Palm's innovative operating system provides an ideal platform to expand HP's mobility strategy and create a unique HP experience spanning multiple mobile connected devices," said Todd Bradley, executive vice president of HP's Personal Systems Group, in a statement. "And Palm possesses significant IP assets and has a highly skilled team. The smartphone market is large, profitable and rapidly growing, and companies that can provide an integrated device and experience command a higher share. Advances in mobility are offering significant opportunities, and HP intends to be a leader in this market."

Jon Rubinstein, chairman and CEO of Palm, is expected to remain with the company along with his leadership team that created webOS, which has received its share of good reviews amid much competition from the likes of Apple's iPhone, Android and others.

In a conference call with analysts, HP executives said they plan to make investments to build out the application development capabilities for the Palm webOS platform, which currently hosts about 2,000 apps.

Before today's news, speculation about Palm's potential buyers included everyone from Nokia to Motorola and almost everyone in between.

James Brehm, senior consultant at Frost & Sullivan, says he was pretty sure an Asian manufacturer would end up with Palm and take advantage of its existing relationships with U.S. carriers Verizon Wireless, AT&T and Sprint, but he says the marriage of the two Silicon Valley companies "makes perfect sense."

Dell was at one point considered a contender, but it's too far into the pursuit of its own strategy, he says. With HP, however, Palm will have the deep pockets and marketing power that it offers while giving HP what it needs to fill out a portfolio that already includes slates/tablets, PCs and laptops.

With Palm shipping what Brehm estimates to be 260,000 handsets a month on average, HP picks up a good operating system with webOS at a price that is no doubt lower than it would cost to develop on its own. Palm also gets the advantage of HP's many operator relationships around the world.

The deal is expected to close during HP's fiscal third quarter that ends July 31. The acquisition is subject to customary closing conditions, including the receipt of domestic and foreign regulatory approvals and the approval of Palm's stockholders.

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