Notes on the HP acquisition of PALM

There is nothing worse than a “Part 2.”

Part 2 for movies almost always means box office bust.

So, this entry is a “part 2,” a continuation of my discussion on PALM in ‘RIM BlackBerry OS 6.0 too Little, too Late?’ PALM was mentioned because, like RIM, its  advertising campaign was poorly executed.

It is hoped that this extended discussion on Palm does not fall into the box office bust. More importantly, consumers and readers hope that HP’s intended acquisition of PALM does not disappoint.

Recall the Palm Ad:

Now, take a look at the advertising created by a PALM fan.

Are these two ads not miles apart?

Ads do not make or break a company, but when PALM leveraged everything it had on the Pre, ads meant everything. Unfortunately for PALM, it was running out of money, and not much is known on how much more private investors were willing to pony up to keep the company running.

The announcement on HP’s purchase of PALM was a surprise. At the risk of sounding knowledgeable in the field of M&A (mergers and acquisition), the PALM purchase makes good sense. The reasons are outlined as follows:

HP has:

-          Strong cash flow quarter after quarter from sales of laptops, desktops, server equipment

-          Strong brand name

-          An iPaq (that big clunky PDA)

HP does not have

-          A presence in the mobile space

PALM has

-          A potentially good product that requires more time in the market to mature

PALM does not have

-          Sufficient cash to continue R&D at a needed degree to compete with Google Android, Blackberry, iPhone, Symbian

-          Sufficient time to develop new channel partners (it launched with Sprint last year, and is only now developing a relationship with Verizon

-          Ditto (on having sufficient time) with its new channel partner, AT&T

Coverage on the HP and Palm deal is substantial. Most notably, Engadget, in the article HP and Palm: What Happens Next, questioned how the HP and Microsoft mobile phone relationship will be affected.

Engadget said that ‘it was unclear whether they were talking about Windows Phone 7 or Windows 7 for PCs — we can’t say we’re expecting to see a Windows Phone 7 handset out of HP at this point, but it’s not totally out of the question.’

Will HP be able to Grow Palm?

We all hope so. Palm needs more cash flow put into its R&D. It needs to further develop partnerships with business software companies. Its phone is powerful. Palm is powerful enough to run games. For example, Electronic Arts developed some games on the PALM platform.

Will HP Succeed?

The success of mergers is hard to predict, but this is not a merger. This is an acquisition. Palm will fit in a niche area within HP that may let Palm thrive provided that:

-          Management encourages Palm to be nimble and responsive to competition, most especially the competition from RIM (for business) and Apple and Google on the consumer end.

-          HP develops and promotes Palm Pre to small businesses (the unified contact feature is powerful – it’s just that no one really knows about it)

“Hope” is the word used to describe this acquisition. By the time the acquisition is complete, Palm Pre Plus’ profit margins will have deteriorated significantly. This is illustrated wtih ‘Verizon Palm Pre Plus drops to $30 on contract.’