Palm Deal Pushes HP Into SmartPhone Market
By Doug Olenick On May 3 2010 - 4:01am
PALO ALTO, CALIF. — Hewlett-
Packard took a huge step towards becoming
a relevant player in the surging
segment with the company’s purchase
last week of Palm, analysts said.
Hewlett-Packard and Palm entered
into a definitive agreement in a cash and
stock transaction valued at $1.2 billion.
Palm, which helped create the PDA
category in the 1990s with its ubiquitous
Pilot, has since fallen behind industry
leaders Nokia, RIM and Apple in
the smartphone market. Palm was listed
10th in worldwide smartphone market
share, with 1.5 percent of the business,
according to an iSuppli fourth-quarter
Analysts gave HP an overall “thumbs up”
for the deal, with most stating HP needed
a boost because it has been struggling in the
smartphone category with its iPaq brand.
“Only time will tell if HP can make
Palm successful. However, they obviously
weren’t successful today, so buying Palm
has little downside for HP, but a big upside,”
said Steve Baker, industry analysis
VP for The NPD Group.
Owning a successful smartphone
business has far ranging implications.
“The battle for dominance in the
high-tech world increasingly is focused
on the mobile Internet. Any company
that can manage to control the flow of
revenue from wireless data users— coming
from subscriptions, ad sales or app
store revenues—stands to benefit enormously.
With the Palm purchase, HP
has positioned itself as a player in this
great technology battle,” said Tia Teng,
a senior analyst with iSuppli.
Teng specifically spoke highly of Palm’s
Pre, which she said compares favorably with
Apple’s iPhone in handling certain tasks.
Baker pointed to the impact smartphones
can have on HP’s other product lines.
“Companies without a strong play
there could see there notebook share
erode as users switch to ever more mobile
platforms,” he said, adding that Dell,
Acer and Apple are all devoting large
sums of money on developing smartphones
and HP needed to make a big
move to stay competitive in the mobile
computing market,” he noted.
However, Forrester Research mobile
analyst Charles Golvin, is not totally on
board with the deal.
“The good news is that HP made a
strong move toward becoming a player in the mobile market. The bad news is that
it’s the wrong move,” he said.
Glovin thinks Palm’s WebOS is not
viable long term, that HP does not need
the Palm brand to be successful and the
intellectual property bought by HP will
prove less useful to HP then it might be
to another company. Finally, he believes
HP could have simply swept up Palm
staff individually for much less money.
The acquisition is subject to customary
closing conditions, including the
receipt of domestic and foreign regulatory
approvals and the approval of Palm’s
stockholders. The transaction is expected
to close during HP’s third fiscal quarter
ending July 31.
Jon Rubinstein, chairman and CEO,
Palm, is expected to remain with the