HP Plans Smartphone Market Assault With Palm Acquisition


HP is planning to acquire struggling smartphone operating system vendor Palm for about $1.2 billion.

Hewlett-Packard on Wednesday said the purchase of Palm, which has been approved by the boards of both companies, is aimed at helping HP take a more high-profile role in the fast-growing smartphone market.

HP is looking to combine its global scale and financial strength with Palm's webOS platform to help it compete aggressively in the smartphone and connected mobile device markets.

That financial strength is important. Palm when it first came to market in 1996 founded an entire new industry, the personal data assistant, or PDA, with its Palm Pilot.

However, the transformation of cell phones into smartphones, and the rapid rise of other mobile devices, caused the PDA market to falter, and Palm transformed into a smartphone manufacturer. Further financial difficulties led Palm to focus more on its webOS smartphone operating system.

Palm has been the subject of a number of takeover rumors.

One of those potential suitors has been Research in Motion (RIM), the manufacturer of the Blackberry mobile devices which may have been interested in Palm as a way to better combat Apple and Microsoft, according to the business website Seeking Alpha.

Other potential suitors include smartphone maker HTC and PC and server maker Lenovo.

Palm stock in early 2000 was priced well over $400, but has recently hovered in the $4 range. The stock closed at $4.63 per share on Wednesday. HP is making a $5.70 per share cash offering for Palm common stock.

Palm's operating system provides a platform to expand HP's mobility strategy across multiple mobile connected devices, said Todd Bradley, executive vice president, of HP's Personal Systems Group, in a statement.

"The smartphone market is large, profitable and rapidly growing, and companies that can provide an integrated device and experience command a higher share. Advances in mobility are offering significant opportunities, and HP intends to be a leader in this market," Bradley said in that statement.