Is webOS key to the deal?
HP has agreed a deal to acquire troubled mobile maker Palm for $1.2bn, propelling the computing giant into the smartphone market alongside Apple and Google.
The deal, priced at $5.70 a share in cash, represents a 23% premium over Palm’s share price before the deal was announced.
As well as giving HP a hardware presence in the smartphone market the acquisition also gives the firm control over Palm’s webOS mobile operating system, which would help it advance its tablet PC portfolio. This would bring it into direct competition with Apple’s recently-launched iPad device.
WebOS would also give HP a platform to take on Google’s Android, Nokia’s Symbian, Apple’s iPhone OS, RIM’s BlackBerry and Windows Mobile in the battle of the mobile operating systems.
“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, Personal Systems Group, HP. “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.”
Despite being an early leader in the handheld computer space, Palm struggle to adapt and keep up as the market shifted to smartphones. Its most recent devices, the Pre and Pixi, were both well reviewed but struggled to sell in high enough quantities. This resulted in Palm reducing revenue expectations to $90m-$100m, well below the $300m analysts had been predicting.
Rumours emerged earlier this month that Palm was actively looking for buyers after admitting defeat in the battle to remain an independent firm. Fellow mobile makers HTC and Lenovo were suggested as potential bidders.
Palm CEO Jon Rubinstein is expected to remain with the firm. “We’re thrilled by HP’s vote of confidence in Palm’s technological leadership, which delivered Palm webOS and iconic products such as the Palm Pre. HP’s longstanding culture of innovation, scale and global operating resources make it the perfect partner to rapidly accelerate the growth of webOS,” he said.