On the surface this deal for Palm at $1.2 billion does not look like a winner for HP and I’m sure shareholders are wondering why.
The market place has already determined it does not want Palm mobile products. According to Palm officials they have a tonne of inventory left unsold and their numbers will be in decline during its next reporting period.
And, judging Palm boss Jon Rubinstein’s giddy reaction this is the kind of deal Mike Zafirovski wanted to make for Nortel shareholders.
Business people prefer the RIM Blackberry, while consumers have chosen the Apple iPhone. Then there are the also-rans such as HTC, Nokia, Samsung and Palm. The last IDC report I read on smartphones placed the Palm Pre as the 8th best selling phone in the market place. HP prides itself on being No. 1 or No. 2 in each area it competes in. Mind you in this report most of the devices came from RIM and Apple. Still those were sales Palm was not getting.
Another thing shareholders will be wondering about is does HP need another prolonged war against RIM, Apple, Google Android and possibly Microsoft with its Windows Phone 7. This is some heady competition. The battle in this market place will be cut-throat at best not just on price but in innovation and design as well. Is HP ready for this battle considering its has to duke it out with Cisco in the data centre.
Has HP bitten off more than it can chew? Why would HP want to make this deal and stop Lenovo from acquiring Palm?
Well it doesn’tt have much to do with cutting off a competitor at the pass. HP during its conference call to explain themselves last night said it would take the Palm webOS, which has gotten great reviews, and use it to expand its mobile offering including tablets and netbooks. That is interesting but definitely not worth $1.2 billion. But the one thing I see as truly strategic is what the OS can do in the cloud. There is no question that cloud services has a lot of momentum behind it. HP did not reveal any specific details about what it’s cloud plans will be for the Palm webOS. But it does not take much thinking to see that HP could use its strength in server computing to enhance the mobile experience.
Currently mobile apps do not perform as well as those on a server. HP’s talented team of technicians and engineers along with Palm’s R&D people can do a lot to optimize mobile cloud services and its starts with Palm webOS.
