HP buying Palm for $1.2 billion
Hewlett-Packard says it will purchase the PDA and smartphone pioneer for $5.70 per share, a premium of 23 percent, in a deal expected to close by the end of July.
Palm, the company that invented the PDA but has struggled to stay relevant in recent years, will be acquired by computing giant Hewlett-Packard.
The company, which took the handheld computer into the mainstream, has traveled a bumpy road.
|November 1998||Jeff Hawkins and Donna Dubinsky leave Palm to start Handspring|
|February 1999||Palm introduces the slimmer Palm V|
|November 2001||Palm announces plans to split into two public companies|
|June 2003||Palm buys Handspring|
|Sept. 2005||Palm introduces its first Windows-based Treo|
|June 2007||Palm introduces the ill-fated Foleo|
|June 2007||Palm announces it is selling a quarter of itself to Elevation Partners|
|January 9, 2009||Palm introduces the Pre|
|June 10, 2009||as Palm CEO|
|April 1, 2010||Verizon Palm Pre and Palm Pixion|
|April 12, 2010||Bloomberg reports that Palm is|
|April 28, 2010||HP announces it isfor $1.2 billion|
|Source: Compiled by Ina Fried/CNET|
The companies announced Wednesday, after Wall Street trading ended, that HP will buy Palm for $1.2 billion. The $5.70 per share offer amounts to 23 percent above Palm's closing price. The deal has already been approved by both companies' boards of directors and is expected to close by the end of July.
For Palm, it's a quiet end to what was once one of the most dynamic companies in technology. Spun out of the computer networking maker 3Com 10 years ago, Palm once held more than 70 percent of the then nascent handheld computing market. But several years of management struggles, product misfires such as the disappointing Foleo mobile computing device, and tough competition from companies ranging from Microsoft and Research in Motion to Apple and Google, turned the innovator into an also-ran.
In 2007, a high-profile, $460 million investment from the private-equity firm Elevation Partners and the unveiling of the Foleo sparked hopes of a revival that never occurred. Elevation Partners is expected to make a paltry $25 million profit on its investment.
With HP, Palm's still well-regarded technology (particularly its new WebOS mobile operating system) finds an owner with both deep pockets and familiarity with the inner workings of Palm. Todd Bradley, executive vice president of HP's Personal Systems Group, was CEO of Palm from 2002 through 2005.
"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," Bradley said in a statement. "And Palm possesses significant IP assets and has a highly skilled team."
Early indications are that HP is interested in Palm's Web OS and array of mobile products, ranging from tablets and Netbooks to phones. Palm also brings a healthy patent portfolio, which has become increasingly important as both Microsoft and Apple have in recent months sought to enforce their own mobile technology patents.
In buying Palm, "HP acquires a strong operating system and an application store with over 2,000 apps," Bradley added. In a conference call, he specificallyand the valuable intellectual-property portfolio. (Palm has 1,650 patents, according to HP notes presented Wednesday.)
"We're thrilled by HP's vote of confidence in Palm's technological leadership, which deliveredand iconic products such as the Palm Pre," said Jon Rubinstein, Palm's CEO, said in a statement. "HP's longstanding culture of innovation, scale, and global operating resources make it the perfect partner to rapidly accelerate the growth of WebOS."
Rumors began to fly thatafter its most recent dismal quarterly earnings report showed that the company had yet to gain any real momentum for its Palm Pre and Palm Pixi phones. Palm had hoped that the new hardware, along with its new WebOS mobile operating system, would help turn the company around.
Although Lenovo and HTC emerged early on as potential suitors, neither appeared as laptops and workstations that HP sells to large corporate clients. Most of HP's rivals in the PC world have developed smartphones intended to compete with Nokia and Apple. Snapping up Palm would give HP a more substantial presence in the market.. HP currently offers one basic messaging phone, but it's packaged mostly with
On the conference call with investors on Wednesday afternoon, Bradley called acquiring Palm "a transformational deal" for the mobile industry. He noted that the smartphone market alone is worth $100 billion and is growing 20 percent annually.
Analysts asked why HP would buy Palm, when you can build on Google's Android mobile operating system for little or no cost. Bradley didn't directly address the question. He said HP believes that the breadth of products between smartphones, slates, and Netbooks is a big opportunity for its own customers. He added that the WebOS developer community will develop apps that will make those devices more compelling.
Without being prompted, Bradley also mentioned that HP has no plans to end its partnership with Microsoft for software. "We continue to be a strategic partner for Microsoft. It's a huge piece of our business and will continue to be so."
Bradley declined to address how quickly it would begin to develop WebOS, but he said the company plans to "heavily" invest in Palm's existing technology. HP will be "increasing" the $190 million that Palm currently spends on research and development annually.
Although Rubinstein was not on the call, Bradley said that--at least for now--HP expects him to continue with HP. "Jon is very excited about staying," he said.
In an e-mail to HP employees revealed in a U.S. Securities and Exchange Commission filing on Wednesday, Rubinstein indicated that the sale to Palm was a kind of completion of the work he'd begun when he.
"I am very excited about the potential of this merger (and not only because I started my career there). HP recognizes the value in our platform, our IP, and our people, and that is all a result of your hard work," Rubinstein said. "In a very short period of time, we amassed a world-class team, brought WebOS to market with widespread acclaim, launched four new devices, and launched in eight countries. In short, we have delivered on our original plan."
Meanwhile, in another SEC filing on Wednesday, Palm cut its financial outlook for the current quarter. Palm said it now expects revenue for the current quarter to be between $90 million and $100 million, and to end the quarter with about $350 million to $400 million in cash and short-term investments.
Update 3:55 p.m. PDT: An investigation on behalf of Palm shareholders has begun, looking into whether HP's offer to Palm was the best option. Lawyers at Washington-based Finkelstein-Thompson are looking at "the potential unfairness of the consideration to Palm's shareholders and the process by which Palm's Board of Directors considered and approved the transaction," the firm said in a statement Wednesday evening. They note that Palm was trading at $17.46 as recently as September 2009, and at least one analyst has set a target price for Palm's stock at $14.00 per share. The stock closed at $4.63 Wednesday.
This post was updated again at 4:51 p.m. PDT with edits throughout.