HP Pays $1.2 Billion for Palm

Palm, who released the PalmPre hoping it would trump the iPhone  and went bust, has been up for sale for quite some time with no takers. That is until now when, to the surprise of us all, it has been sold for $5.70 per share ( a total of  $2.1 billion ) to the 3rd largest computer company in America. Why would they invest in such a deal that noone else would touch?

Here is the skinny as posted in the company’sHP News Release:

HP and Palm, Inc.  today announced that they have entered into a definitive agreement under which HP will purchase Palm, a provider of smartphones powered by the Palm webOS mobile operating system, at a price of $5.70 per share of Palm common stock in cash or an enterprise value of approximately $1.2 billion. The transaction has been approved by the HP and Palm boards of directors.

The combination of HP’s global scale and financial strength with Palm’s unparalleled webOS platform will enhance HP’s ability to participate more aggressively in the fast-growing, highly profitable smartphone and connected mobile device markets. Palm’s unique webOS will allow HP to take advantage of features such as true multitasking and always up-to-date information sharing across applications.

“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,” said Todd Bradley, executive vice president, Personal Systems Group, HP. “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.”

“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. HP’s longstanding culture of innovation, scale and global operating resources make it the perfect partner to rapidly accelerate the growth of webOS,” said Jon Rubinstein, chairman and chief executive officer, Palm. ”We look forward to working with HP to continue to deliver industry-leading mobile experiences to our customers and business partners.”

Under the terms of the merger agreement, Palm stockholders will receive $5.70 in cash for each share of Palm common stock that they hold at the closing of the merger. The merger consideration takes into account the updated guidance and other financial information being released by Palm this afternoon. The acquisition is subject to customary closing conditions, including the receipt of domestic and foreign regulatory approvals and the approval of Palm’s stockholders. The transaction is expected to close during HP’s third fiscal quarter ending July 31, 2010.

Palm’s current chairman and CEO, Jon Rubinstein, is expected to remain with the company.

At the same time companies that have had little to do with Hardware,such as Google, are coming out with phones, e-reades, etcetera. So perhaps  this deal is not so surprising for HP. After all the Palm Pilot was quite a phone in it’s day and was quite popular until the iPhone erupted on the scene and changed cell phones forever. Also it has been rumored that the e-reader that HP was to manufacture for Microsoft has been canned. This would be a great time for HP to branch out on their own and perhaps use the Palm technology already in place for a starting point for such a venture on their own.

Let us know what you think about this acquisition?