In the biggest acquisition in the smartphone market in years, HP is going to buy Palm in a deal worth about $1.2 billion.
HP summed up its basic reason for acquiring Palm in a single sentence: “Advances in mobility are offering significant opportunities, and HP intends to be a leader in this market.” However, HP has given up on trying to do this with its own resources — this isn’t really surprising, the few HP iPAQ smartphone models that were released disappeared without making a peep.
A conference call HP held yesterday made it very clear that HP bought Palm for the webOS, and is going to use this operating system to become a player in the mobile market. HP believes that the OS has value but Palm didn’t have the cash to compete in a tough market against the likes of Apple, RIM and Google. HP has billions in cash ($16.6 billion at last count), and has promised to boost Palm’s R&D and marketing budget.
HP has also made it clear that it intends to use the webOS on more than just phones. Todd Bradley, the head of HP’s Personal Systems Group, said during yesterday’s call, “Between smartphones, slates and potentially netbooks, there are a lot of opportunities here.”
Good News for Palm Fans
In an ideal world, the webOS would have been enough to make Palm a profitable company again, but it didn’t happen. Sales of the Palm Pre and Pixi have been anemic, and analysts have predicted that the company was going to go bankrupt in a couple of years when it ran through its cash supplies.
A purchase by a company that intends to keep making webOS-based smartphones was the next best option. HP fits the bill, and Palm is going to continue on as a separate business unit inside of the larger company.
The worst scenario didn’t come to pass. Palm could have been bought by a rival that just wanted its extensive patent library and/or collection of highly skilled developers. If this had happened, the webOS would probably have been tossed on the rubbish heap.
That would have been a shame. There is a great deal to like in the webOS. It handles multitasking better than any other mobile operating system, and its ability to bring information from a wide range of sources is very useful.
Palm’s hardware isn’t as good, mostly due to its fixation on keyboards almost to small to be usable. If HP can convince Palm’s designers to make smartphones with decent keyboards they’ll be more competitive against models running Google’s Android OS.