HP Saves Palm, Reintroduces Itself to the Mobile Device World

Event Summary

April 28, 2010 – HP and Palm announced that they have entered into a definitive agreement under which HP will purchase Palm at a price of $5.70 per share of Palm common stock in cash, approximately $1.2 billion. The transaction has been approved by the HP and Palm boards of directors and is expected to close during HP's third fiscal quarter ending July 31, 2010. Palm's chairman and CEO, Jon Rubinstein, is expected to remain with the company.

Quick Take

Analytical Summary

• Current Perspective: Positive on HP acquiring Palm, because Palm could not survive on its own despite an excellent smartphone OS, and HP has had no success with its line of Windows Mobile phones that virtually no one knew even existed. Palm was in trouble for a reason, so HP has a long road of additional investment ahead of it, but the promise of stability should help convince developers to support the webOS platform.

• Vendor Importance: Very high to Palm, which was burning through cash while its first round of webOS handsets was faltering in the market. High to HP, which needed a much stronger presence in mobile. Vendors who sell computing products need to be competitive in the mobile arena, because that is where computing is going; in developed markets mobile is one of the biggest computing growth opportunities and in emerging markets the phone is often a PC substitute. Actually, that may be happening in the U.S. as well – Apple’s iPad is competing with netbooks using a mobile OS, and Android is moving to tablets as well.

• Market Impact: High on smartphones and personal connected devices, because HP has the resources to ensure that webOS is a viable mobile platform. HP also plans to expand Palm’s reach both in terms of distribution and the types of devices where webOS will be deployed, including tablets and possibly netbooks.

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Competitive Strengths and Weaknesses

Response & Recommendations

Analytical Perspective

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