HP HAS announced a $1.2 billion (€906 million) deal to buy Palm, betting it can resuscitate the struggling smartphone maker to compete with the likes of Apple and BlackBerry-maker RIM.
Analysts say 2010’s third-largest US tech acquisition grants Palm’s devices global production and distribution reach while launching the world’s top PC maker into a tech arena experiencing blistering growth.
The news on Wednesday surprised many on Wall Street, since much of the long-running takeover speculation surrounding Palm had shifted in recent weeks to focus on potential Asian bidders, such as China’s Lenovo.
An early pioneer in handheld devices, Palm once dominated the market but has since been surpassed by the iPhone and BlackBerry. Palm put out a new mobile operating system, the well-reviewed webOS, last year but even that has been overshadowed by Google’s Android software.
In a sign of Palm’s struggles, the money-losing company headed by Jon Rubinstein – an ex-Apple executive famous for developing the iPod – slashed revenue expectations for the current quarter.
“If you saw the guidance Palm just put out, it was clear they had to sell,” said Phil Cusick, analyst at Macquarie Research.
“Given how quickly Palm’s business was falling off and how fast their cash was going out the door, they’re lucky to get what they got.”
Shares of Palm, 30 per cent owned by Elevation Partners, jumped 27 per cent to $5.88, above HP’s $5.70 cash offer. Some investors could be betting on a higher bid, while others could be covering short positions on the heavily shorted stock, analysts said.
HP said the deal valued Palm at $1.2 billion including debt. Based on Palm’s latest filing, the deal values its 167.892 million shares outstanding at $957 million. – (Reuters)
