Palm Hires Bankers to Explore Sale of Company
After a few disappointing quarters and a shrinking sales base, Palm has reportedly retained the services of two investment bankers to help it explore several options for survival, including sale of the company.
The company has been haunted by flagging sales in an increasingly crowded market for smartphones. With Apple's iPhone, multiple Android phones, BlackBerry and Windows Phone, Palm (NASDAQ: PALM) has found itself under increasing pressure.
The Pre and later Pixi phones were very highly praised when they were announced, but Palm allowed too much time to pass between the announcement and launch, and then it was tied exclusively with Sprint, the nation's No. 4 wireless provider in terms of consumer reach.
It has since added Verizon Wireless, the nation's largest wireless provider, but the phone has languished behind the Motorola Droid, and Verizon is practically giving the Pre and Pixi away at this point. Palm shipped 960,000 smartphones in the first quarter to retail but, only 408,000 of those were sold to consumers.
Palm has retained the services of Goldman Sachs Group and Qatalyst Partners, according to a source who spoke to Reuters on the condition of anonymity.
The asking price would probably be close to $1 billion, given the company's market value of $870 million. The stock jumped more than a dollar on Monday after news of the potential sale hit. The company is sitting on $591.9 million in cash and short-term investments, but has $600 million in liability and $300 million in long-term debt.
Spokespeople for Palm did not immediately return calls for comment.
So who should buy the ailing company? Several names have come up in the trade press, because Palm would make for a really good catch. It has an impressive technology in the webOS that powers the Pre and Pixi, but more important than that, it has a rich portfolio of patents and intellectual property that every smartphone vendor would want.
HTC, the Chinese handset maker that has been focusing on Android-based smartphones, told Taiwan's Economic Daily News it had opened negotiations with Palm last week. There have been a variety of other names bandied about, including Lenovo Group, Microsoft, HP, Dell, Nokia and Research in Motion.
If HTC bought Palm, it would be supporting three different platforms -- webOS, Windows Phone and Android, said William Stofega, program manager for mobile device technology at IDC. Nevertheless, the company is very much looking forward to improving its game in the U.S., he added.
"They could use [Palm's IP] and that could be part of the reasoning behind HTC's move," he told InternetNews.com. "HTC certainly needs some help there in terms of what's been going on around user interface." Apple recently filed suit against HTC over patent-infringement claims involving the HTC-modified Android UI.
HP is right next door to Palm in Sunnyvale, Calif., and Stofega thought that would be a better match, but HP has said it is not interested. Neither is Dell, which is trying to get into the smartphone game with its own Android phone.
RIM and Nokia are not an easy match because they have their own closed systems, and it would not be easy to integrate webOS with their respective operating systems. Plus both are in foreign countries and have very different corporate cultures, making things "bad all around," as Stofega put it.
He said the way to think about a potential partner for Palm is to look beyond the American market, which is saturated with competitors.
"There is a whole opportunity outside the U.S., and only one company has that under control and that's Nokia," Stofega concluded. "Palm hasn't really moved outside the U.S., so someone interested in two things -- adding Palm to their portfolio and having some pre-existing arrangements in BRIC countries (Brazil, Russia, India and China) to offer the Lenovo-like experience -- might be looking for a company like Palm."
TAGS:acquisition, Palm, Palm Pre, Pixi, Goldman Sachs