HP Buys Palm: Why It's a Good Deal

Wow. The rumormongering about Palm ends today: HP is buying the struggling mobile pioneer for $1.2 billion. One of the largest tech companies on the planet will own WebOS, one of the best available mobile operating systems–but one which has failed so far to make much of an impact as it’s shipped on Palm’s Pre and Pixi handsets. It qualifies as a shocker given that most of the scuttlebutt about possible purchasers involved Asian manufacturers such as Lenovo and HTC.

When a huge old-school company buys a scrappy (relatively) little one, my instinct is always to be worried. There are far more examples of such mergers failing than there are of ones that have thrived. And there aren’t many examples of companies in distressed condition getting turned around big time.

But let’s play optimist for a moment…

When it comes to phones, HP is a blank slate. Yes, it makes a couple of obscure Ipaq handsets, but HP hasn’t really ever tried to get into the phone business. Those Ipaqs are, basically, targeted at big HP corporate customers who might buy HP phones if they’re available. With no serious HP heritage in phones, there’s no need for a messy merger of product lines and technologies. The DNA of HPalm phones will come mostly from Palm, and that’s good.

It makes sense for HP to own a mobile OS. Integrating hardware and software appears to work fairly well for Apple, no? I can see why a company with enough bucks to buy an OS would prefer to do so–especially with all the nasty legal warfare going on among intellectual-property owners. And HP bought itself a really good OS.

HP might be able to take WebOS places that Palm couldn’t. After the Foleo fiasco, Palm quite reasonably chose to stick to its smartphone knitting. As a much larger, more prosperous company, HP might reasonably decide to put WebOS on slates or set-top boxes or other devices that Palm would likely have avoided.

A Palm without a little cloud over its head is a good thing. With the era of uncertainty over the company’s viability over, retailers may be more excited about stocking Palm products, and consumers may be more confident about buying them.

I can’t think of an outcome that would have been clearly better. Okay, I wish Palm had been able to stay independent–the happiest ending for this story would have been it bouncing back on the strength of its products. But that didn’t seem to be in the cards. And I can’t think of another company with a billion dollars to spare that would have clearly taken better care of Palm’s assets.

The last time Palm was acquired, it worked out okay. The first time I ever met with the company was back in 1995. Execs told me about the first PalmPilot–not yet called that–and said that the company had just been bought by USRobotics. It was the beginning of Palm’s greatest era, and hey, that’s a precedent!

Your take?

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