Suspense is Over: HP Buys Palm for $1.2 billion

The self-described largest IT company in the world is getting into the mobile phone business as HP agrees to buy Palm Inc. in a deal valued at $1.2 billion (a 20%+ premium over the closing price of Palm’s common stock). In a past post, I speculated that the ultimate winner in a battle for Palm (other than Palm, itself) would be Lenovo, which had proven itself adept at updating, manufacturing and distributing IBM’s ThinkPad line of laptops among other things. My belief was that Palm’s introduction of the WebOS would be more important than its line of smartphones in terms of providing line extensions to Lenovo.

I didn’t include HP in the mix, thinking that its tight relationship with Microsoft over the years might preclude it from opting for an alternative operating environment. But, come to think of it, Palm’s early successes were built on handheld devices that did a super job of synching up with info in Microsoft Exchange Services and Outlook clients. As for its WebOS, Todd Bradey, executive VP of HP’s personal systems group said in the company’s press release, “Palm’s innovative operating system provides an ideal platform to expand HP’s mobility strategy and create a unique HP experience spanning multiple mobile connected devices.”

$1.2 billion sounds like a steep price for HP to pay to re-enter the smartphone business, but it also indicates that HP has high expectations for Palm’s products, services and software. It is likely to use WebOS as an application platform and run-time for a broad line of mobile devices, including a re-vamped version of its tablet PC, which was sort of a dud when shown off by Microsoft’s Steve Ballmer at this year’s Consumer Electronics Show (CES). Only time will tell whether the purchase will be accretive or not.



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