Palm for Sale, HTC Interested

Smartphone maker Palm is seeking bids to be purchased, Reuters reported April 11, citing people familiar with the situation.
 
According to Taiwan's Economic Daily News, HTC, which makes Google's Nexus One phone, among other popular models, is said to be open to discussions about acquiring Palm.
 
Goldman Sachs and Qatalyst Partners have reportedly been enlisted to find a buyer for Palm, which has been struggling to turn around its fortunes since the June 2009 launch of the Palm Pre on the Sprint network. At the time, all parties hoped they had an "iPhone killer" on their hands, but the story played out differently.
 
While the Pre received strong support from the critics, it had the bad luck of launching within days of the Apple iPhone 3G S and being quickly followed by a slew of smartphones running Google's Android operating system-which has quickly become the fastest-growing mobile OS in the United States.  
 
Shortly after the Pre's arrival, Palm introduced the Pixi, a lower-cost younger sibling of sorts, which also runs Palm's well-received webOS platform. Both devices have since also been made available on the Verizon Wireless network and are scheduled for a debut on AT&T.
 
Still, on Feb. 25, 2010, Palm CEO Jon Rubinstein warned Wall Street that Palm's third-quarter earnings were going to fall below expectations, after which he rallied his team, sending out a company-wide memo in which he described tactics-such as a big ad campaign push and new carrier partners-that were already in place working to put Palm back on its feet.  
 
On March 18, Palm submitted third-quarter finances that nonetheless stunned. During the quarter, it reported, it sold only 408,000 smartphones-a loss of 29 percent from the quarter before and a 15 percent year-over-year loss. "Our recent underperformance has been very disappointing, but the potential for Palm remains strong," Rubinstein said in a statement at the time.
 
"Given Palm's cash flow needs and the mountain it has to climb to be successful, there doesn't seem to be a better way to get where it wants to go than coming into a sugar daddy," Roger Kay, principal analyst with Endpoint Technologies, told eWEEK.
 
"[I'm] not sure how good a deal it is for the acquirer, though," Kay continued. "Of course, the buyout firms are all for it. They make their money on fees and have no skin in the game."

As far back as May, Dell-which was flaunting an interest in "smaller-screen devices" and had a good deal of cash to its name-was named as a possible new owner for Palm.

Kay told eWEEK that HTC, already a strong brand in the phone market, wouldn't be a bad match. Lenovo, he said, is less of a fit, since its phone base is in China, and for Dell, Palm would just "be a distraction."   Analyst Neil Mawston, with Strategy Analytics, says a merger or takeover could give Palm a "psychological lift," helping to revitalize it.
 
"The advantages of buying Palm would include established distribution relationships with most of the major operators in the world's most important smartphone market, the United States, and access to a new and stable operating system with good usability," Mawston told eWEEK. "The disadvantages of buying Palm would include its imperfect financial condition and a famous brand that has taken a beating in recent months."
 
Mawston named HTC, Lenovo, Dell, Microsoft, ZTE and Huawei as potential buyers. "All of these brands are in 'growth mode,' and they could strengthen their U.S. presence by partnering with Palm," he said.
 
Analyst Jack Gold, with J. Gold Associates, also pointed to the Chinese market.
 
"A ZTE or Huawei would be a more probable acquirer [than HTC or LG] and could leverage both the Palm brand and its technology for both domestic and international market expansion (they already have phone operations domestically and are trying to expand worldwide)," Gold said in an April 12 statement. "And they have the cash. Lenovo could also be a possibility."
 
Gold dismissed the possibility of an HTC or LG purchase, writing, "What does Palm bring to the table that HTC and LG don't already have?"

Endpoint Technologies' Kay suggested that, along with the question of which manufacturer will purchase Palm, there's the matter of what it will do with it.
 
"I suppose the more interesting question ... is whether Palm should be operated as an independent entity or have its bones picked over for any valuable technology it may have," Kay said, adding that the webOS platform is worth keeping.
 
He followed, "Maybe Qualcomm could use it."