Palm Handhelds Saved by HP Acquisition

Palm received a $1.2 billion lifeline from computer giant HP, which announced a definitive agreement to buy the smartphone supplier for $1.2 billion. The transaction has been approved by both HP's and Palm's board of directors, the companies said.

A well-respected smartphone pioneer, Palm's innovative webOS mobile operating system has garnered critical praise, but its smartphone line has struggled to gain traction in a highly competitive market that has seen Apple's iPhone, Android devices and Research in Motion's BlackBerry line all thrive.

But the considerable resources of HP (NYSE: HPQ) could change all that, it said.

"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," Todd Bradley, executive vice president of HP's Personal Systems Group, 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."

The company said in a presentation about the deal that it sees the smartphone market now totaling $100 billion and growing annually.

HP also said it expected Jon Rubinstein, Palm's chairman and CEO and formerly a key hardware executive at Apple (NASDAQ: AAPL), to stay with the company.

"We’re thrilled by HP's vote of confidence in Palm's technological leadership, which delivered Palm webOS and iconic products such as the Palm Pre," Rubinstein 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."

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

The news comes on the heels of Palm losing a major distribution channel -- the chain of RadioShack chain of stores, which announced earlier this month that it had dropped the Palm Pre and Pixi smartphones.

The transaction is expected to close during HP's third fiscal quarter, which ends July 31.

David Needle is the West Coast bureau chief at InternetNews.com, the news service of Internet.com, the network for technology professionals.


smartphones, HP, Palm, mobile device, Palm handhelds