HP Pitches the $1.2 Billion Palm Deal
Hewlett-Packard’s (HPQ) explanation for the Palm (PALM) deal boils down to this: We’re going to use Palm for more than smartphones — we see them powering tablets and other devices, too. Plus, have you seen how big we are? We can afford to spend $1.2 billion on this thing and have plenty of money left over to beef up R&D, marketing, etc.
Here are my notes from the call the company conducted this afternoon, where they go into a bit more (but not much) detail. All notes below are paraphrased unless I’m using quote marks. You can see the documents HP is using to pitch the deal at the bottom of this post.
On the call:
IR guy walking through blocking and tackling.
IR guy suggests you consult slides at the bottom of this post. To learn stuff you already know and/or don’t care about.
OK. Here’s Todd Bradley, EVP Personal Systems Group.
It’s “transformational deal”. Of course.
People spend a lot of time online.
Let’s go to slide five:
We’ll grow Palm beyond smartphones, and into an integrated platform.
Impressed? Then turn to slide six!
Many superlatives to describe Palm. And their IP, which includes “cloud-based assets”.
Don’t forget the people! They’re great too.
HP brings money and intention to “drive this business aggressively.”
Question from the peanut gallery: Don’t you want Mark Hurd on this call?
Check out slide 8! Critics love us!
Almost done w/the slides.
Time for Q&A.
Questions and Answers
Why buy instead of building for Android? They’re doing pretty well already. Also, please talk about whether deal is dilutive/accretive.
Bradley: We’re looking at building an ecosystem that includes slates, pcs, etc. But we’ll keep working with Microsoft, in case you were wondering.
IR guy: A few cents of dilution in second half of the year. There will be some synergy next year, given our scale advantages. But we’ll be investing in the business, too. So mild dilution near-term, accretive long-term.
What’s timeline to evolve WebOS into other platform. Also, is there a breakup fee?
Bradley: Too early to talk about timelines. Need to get deal closed.
IR guy: Won’t talk about those kind of details. You’ll have to look in the proxy when we file it.
Talk about competitive landscape. Are you positioning this for consumers, corporate?
Bradley: Smartphones obviously are consumer-oriented now. We’ll try to broaden distribution. But tablet/slate products are so new that we opportunities both for consumers and “enormous interest on behalf of channel partners” for vertical deployments like healthcare, etc.
You praised senior team. Are you locking them in?
IR guy: We have a “significant retention program” in place for senior guys.
Bradley: Jon Rubinstein in particular is psyched about this.
Talk some about leveraging your positions in the carrier market. Can you explain what HP’s positioning is at carrier level? And how do you help Palm, which has struggled w/carriers?
Bradley: We’re going to invest a lot of money in this. [If there's answer here, I don't get it]
Did you say this would mildly dilutive for 2011?
IR guy: Yes. But I won’t talk about specific numbers. We’re a big company. “It will be mild. I’ll just leave it there.”
Please talk about how you keep R&D and engineering team on board. And will you integrate them into HP?
Bradley: We’ll operate them as a business unit, which is the way we operate today.
Also, what’s up with your iPad competitor/tablet? Does that get shifted over to Palm?
Bradley: Not sure yet.
Apple is succeeding as a content platform and a hardware platform. Do you see getting into content à la iTunes?
Bradley: Stock answer about delivering connected devices. “I don’t think we’re content creators, but we are access providers”.
So will you do deals with music, etc. like Apple does?
Bradley: Not getting into specifics.
We figure Palm is spending $190M a year on R&D. Do you think that’s enough?
IR guy: We’ll be putting more into that. Also putting more into sales & marketing, etc.
[Meanwhile, PE Hub's great Dan Primack answers my "Where's Mark Hurd" question via Twitter: "as of a few minutes ago, he was at the annual meeting of Silver Lake Partners"]
Finally, here are highlights from Kara’s interview of Palm CEO, Jon Rubinstein, at the All Things Digital from Las Vegas event earlier this year. At the end of the clip, Rubinstein considers the possibility of being acquired.