Who Will Buy Palm? If Not HTC, How About HP?

Well, this is a bit ironic, coming as it does on the heels of Palm CEO Jon Rubinstein’s “I believe Palm can survive as an independent company” proclamation Thursday: HTC has reportedly declined to bid on the company, which is said to be shopping itself around.

Evidently the Taiwanese hardware manufacturer took one look at Palm’s (PALM) books and decided an acquisition isn’t worth the trouble. “There just weren’t enough synergies to take the deal forward,” a source close to talks between the two companies told Reuters.

And so speculation about a potential acquirer is turning elsewhere. Lenovo seems to be the leading candidate at the moment. The company has big aspirations in China’s mobile market and a penchant for making big foreign acquisitions. It purchased IBM’s (IBM) ThinkPad business a few years back and tried to buy Packard Bell, so why not Palm?

Well, for one thing, Palm’s market share is too small to be of real benefit to Lenovo. For another, the company is already committed to Google’s (GOOG) Android for the OS to run on its soon-to-debut Lephone.

Finally, Palm’s asking price is said to be around $1.3 billion. Lenovo had about $2.4 billion in net cash reserves on hand the end of 2009. Would Lenovo really spend more than half of that on Palm, a company whose books frightened off HTC? As Larry Dignan writes at ZDNet, it’s hard to make the case that it should.

So if not Lenovo, then who?

How about Hewlett-Packard (HPQ)? With handheld sales that fell by more than half year-over-year in its first quarter, HP is surely looking for a way to revive them and capture a larger portion of the important mobile market. Acquiring Palm could be a good way to do it. Here’s why:

  • Yes, HP is a Windows shop with, no doubt, big plans for Windows Phone 7, but that OS will likely figure in devices aimed at the enterprise market. With Palm’s assets, HP could target the consumer space as well.
  • Palm’s webOS is scalable. HP could use it in other devices–tablets, for example–differentiating them from those of competitors using open-source operating systems like Android.
  • In Palm, HP would gain a turnkey smartphone division–a venture with a slick smartphone OS, a deep mobile patent portfolio, a talented R&D team, the beginnings of an app ecosystem and established carrier relationships.
  • Palm and HP both call Silicon Valley home, and former Palm exec Todd Bradley currently heads up HP’s Personal Systems Group. Obviously, there would still be integration risks, but there are clear synergies in culture and location that would at least temper them a bit.
  • HP has some $14 billion in cash on hand, more than enough to cover Palm’s rumored $1.3 billion asking price with plenty left over.

That seems to me to be a pretty compelling case. Has it been made inside HP? I can’t say for sure, though we may find out in the weeks ahead.

6 comments
ZennCoach
ZennCoach

HTC is Not For Sale, Nor Would They Have Any Reason To Give Up Their Growth Rate & w/in a Couple of Months, Will Make Everyone's Hair Stand up When They Launch w/Sprint The HTC EVO~Which Will Put a Huge Blister on Every Other Cell Maker...including Apple's New iPhone OS. Why Do You Think The New iPhone Has a New Two Camera Configuration...Because They Saw the Spec's of The HTC EVO, Almost 6 Months Ago, From HTC & What NTC Was PLanning. & Besides, Apple is Just Playing Catch up on a Number Features, That They Will Be Offering in the New iPhone OS4's iteration....For What it is Worth...Easy~E.

meeklepeekle
meeklepeekle

you missed the obvious on this -- the former palm exec at HP is the one who is fumbling HP's handheld business. HP should simply send him back to Palm...

aclsmb
aclsmb

I think it's a good idea, but realistically HP could just also start developing Android phones like everyone else, especially since it's already experimenting with Android with netbooks and now possibly tablets. I think a better bet and more synergy (no pun intended) long term for HP is to buy HTC which covers both Windows (enterprise) and Android (consumer) and they would pick up SENSE UI software...sort of like what they are already doing on TouchSmart PCs, but a whole lot better. I think HP needs to decide if they really want to own a whole OS or just be a reseller. From my perspective, HP lacks industrial design creativity and talent for the mobile business which HTC could bring without the risk of trying to be an OS owner. HP seems to be all about using industry standard software and just putting hardware around it, rather than owning an OS. Again I don't think it would be bad if HP did try to own an OS, but it just seems like they don't like to do stuff like that...although maybe they really should. On a related note, I would expect HTC to be a whole lot more expensive

TrendRida
TrendRida

Cisco was rumored a few weeks ago. Either Cisco or HP would make sense from a cultural perspective. Employees would flee with a Lenovo purchase. If it comes down to Cisco or HP - it won't be a $1.3B purchase. Those guys are the best in the acquisition business. Palm's 30 day average stock price is 4.70. Maybe they will get that - $5 tops.

moranuli
moranuli

it really depends on your perception

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