HP to Buy Struggling Palm as Ticket into Smartphone Market

UPDATED: News Analysis: Hewlett-Packard may be looking at enterprise uses first and foremost as it integrates Palm's intellectual property into its product lines.

Smartphone maker Palm, which wasn't able to find a way to outflank Apple and its phenomenally selling iPhone during the last nine years, has decided to make a graceful exit by accepting a $1.2 billion buyout offer from Hewlett-Packard.
Palm sold only 408,000 phones last quarter; in contrast, Apple sold 8.7 million iPhones in the same time period.
On the other hand, HP, the world's second-largest IT systems provider, now re-enters a business in which it has had limited visibility and success: connected telephones. But smartphones aren't the only product for which HP is investing so much cash on hand in Palm.

Todd Bradley, executive vice president of HP's Personal Systems group and a former Palm executive, told a Webcast audience April 28 that HP sees not only a $100 billion smartphone market (and one that is growing by 20 percent per year) to tackle but also new opportunities making "additional connected mobile form factors."

Bradley didn't say it outright, but the implication was that we may see an HP/Palm-branded tablet computer to compete with Apple's super-hot iPad.
"We anticipate that with the WebOS [Palm's proprietary mobile operating system], we'll be able to aggressive deploy an integrated platform that will allow HP to own the entire customer experience, to nurture and grow the developer community, and provide a rich media experience for our customers," Bradley said.
Analysts, at least off the top on April 28, were divided on what this means to HP, Palm and the IT industry in general
"I am very surprised at this," Gartner analyst Ken Dulaney told eWEEK. "I am puzzled from what I've picked up-that they [HP] want to use WebOS on tablets and netbooks. I don't know why they'd go after that market. I don't see much upside in this.
"WebOS still needs a lot of work. HP's going up against Nokia and other big players. They're also a partner of Microsoft; this isn't going to make Microsoft very happy.
"The best thing I could say about this is that they get a really good group of people in Palm, whom I have a lot of respect for, and it gives them an organization that is much stronger than what they've got for the smartphone business."
Remember the iPaq?
Technology Business Research analyst Ken Hyers told eWEEK, "HP is making the move to give it a serious smartphone business that it can sell into enterprises. It already had a smartphone business, the iPaq, that it inherited from Compaq, but it was merely a blip on the market screen."
HP has been a player in the smartphone market for years, and no one really knows about it, Hyers said.

Chris Preimesberger

Chris Preimesberger

Chris Preimesberger is Editor of Features & Analysis at eWEEK, responsible in part for the publication's coverage areas. In his 10 years and more than 3,500 stories at eWEEK, he has distinguished...