Hewlett-Packard buys struggling Palm for $1.2bn

The computer giant Hewlett-Packard has agreed to buy the struggling smartphone company Palm for $1.2 billion, ending the independence of the pioneer of the personal digital device.

The move will give the world’s largest PC maker immediate entry to the rapidly growing market for smartphones, which is currently dominated by Research in Motion’s BlackBerry, Apple’s iPhone and Nokia.

Palm’s smartphone webOS operating system, launched last year, was well received, but sales of Palm’s handsets, the Pre and the Pixi, have proved disappointing.

HP will pay $5.70 for every Palm common share, a 23 per cent premium over Palm’s $4.63 closing price on Wednesday. The company will pay nearly $1 billion in cash and cover Palm’s debt, making the total deal worth $1.2 billion.

Speculation about Palm’s future has raged for months as it struggled for sales against competition from Apple, Google’s Android phones and RIM. Its shares had traded as high as $18.09 in the past year on hopes for the webOS.

Palm’s current chairman and chief executive, the former Apple executive Jon Rubinstein, is expected to remain with the company. “HP’s longstanding culture of innovation, scale and global operating resources make it the perfect partner to rapidly accelerate the growth of webOS,” he said.

Sources had linked Palm to a number of Asian computer companies. HP, based in Palo Alto, near Palm’s headquarters in Sunnyvale, has been seeking to fill a gap in its product portfolio. It has smartphones using Microsoft’s Windows software for mobiles, but they have made little impact on the market.

Todd Bradley, the HP vice-president, said: “The smartphone market is large, profitable and rapidly growing. 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.” Mr Bradley, who runs HP’s personal computer division, is a former Palm chief executive.

Palm yesterday again cut current-quarter expectations. It now expects revenue of $90 million to $100 million, after its mid-March forecast that revenue would be less than $150 million.

Phil Cusick, a Macquarie Research analyst, said of Palm’s new revenue guidance: “It was clear they had to sell.”

Source: The Times