Hewlett Packard buys handset manufacturer Palm for $US1.2 billion

Computer manufacturer Hewlett Packard will purchase smartphone maker Palm for $US1.2 billion, the company has confirmed, saying it will use the acquisition to expand its reach into developing mobile products.

The confirmation comes after weeks of rumours regarding a sale, during which it was reported that Palm was looking for a potential buyer. The company has struggled to gain market share with its WebOS platform, which was once touted as a threat to the iPhone but has since failed to resonate with smartphone users.

The acquisition also comes as HP is attempting to break into the portable computer space with its upcoming tablet device. Some industry analysts have already said the acquisition could see the development of a tablet computer based on the WebOS system.

In a statement, HP said the transaction, at a price of $5.70 per share of common stock, has been approved by the Palm board of directors.

“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,” executive vice president Todd Bradley said in a statement.

“And Palm possesses significant IP assets and has a highly skilled team. 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.”

While the $US1.2 billion price tag is a solid price for the company, it also represents just how much Palm has suffered to keep up in the age of the smartphone. In October 2009, Palm was trading at about $17.46 per share, and in January was trading at about $13.40.

It attempted to break into the market with the Palm Pre device last year. The company hoped to emulate the success it had in the late-1990s with handheld devices, but the gadget was deemed too underpowered to act as a threat.

Research firm Gartner said in a statement that faced with low sales and dim prospects for the future of its products, Palm had no other choice but to team up with a major manufacturer.

“Palm really had no option but to withdraw from global markets and focus all of its energies where it is most likely to succeed. WebOS is a revolutionary mobile OS, but it has only a 0.2% market share today.”

“The Palm Pre and Pixi are credible competitors for the iPhone and BlackBerry, but they will also require strong promotion and many advertising dollars to achieve the sales that Palm needs to return to growth. Compelling new hardware devices alone are not a competitive advantage. Palm’s WebOS platform and its engineers (who have always had a strong culture of understanding hardware and software as an integrated whole) are of more value.”

Additionally, a spat with Apple regarding the gadget’s ability to “sync” with the iTunes software also turned off a lot of users.

Nevertheless, HP said it was attracted to the potential of the WebOS platform, saying it intends to take advantage of features “such as true multitasking and always up-to-date information sharing across applications”.

Additionally, HP has also gained access to a range of features Palm has patented over the years. Being one of the first players in the handheld gadget market, the company has a range of ideas filed away that HP could finally bring to fruition.

Palm chairman and chief executive, Jon Rubenstein, said in a statement that the company is dedicated to expanding the WebOS platform. Additionally, contrary to earlier reports, it is now confirmed Rubinstein intends to stay in his current role at Palm.

“We look forward to working with HP to continue to deliver industry-leading mobile experiences to our customers and business partners,” he said.