HP Buys Palm - What It Means

The word is out and HP is buying Palm! If the boringness of HP doesn’t kill it in the process, this merger could be good for anyone looking for a solid smartphone that beats Google and Apple in many areas. So what exactly happened? After a precipitous decline in Palm’s business and several weeks of speculation, HP announced today that they are acquiring the phone company for $1.2 billion. CEO Jon Rubinstein is said to remain on board ater the merger. The announcement comes as a hug surprise after rumors had linked everyone from HTC to Lenovo as possible suitors, and after Rubinstein insisted that Palm would be fine on their own. As for Palm, it’s the lifeboat they’ve desperately needed sever since their stock price was targeted at zero earlier this year. For HP, it’s an opportunity to instantly become a major smartphone player. The whole transaction was actually a relative bargain for HP; the purchase price of $5.70 is a decent premium over where Palm was trading yesterday, but this is a company was valued at twice that not very long ago. HP isn’t just acquiring Palm’s hardware, the real crown jewel might be webOS. The deal is expected to close by July 31, the end of HP’s third fiscal quarter. They plan to hold a call later, in which case we’ll find out more information.

The Good

HP has the resources to fully leverage Palm’s hardware and software, and not just on smartphones either. HP has made large investmens in the past with their TouchSmart interface, and while it’s a fine skin, it could only stand to gain from webOS insights. In fact, the acquisition has broad implications among a number of device categories.

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Phones

HP’s phone line has always been undistinguished, so for them too buy Palm is effectively to install a pre-made well-regarded mobile division into their company. So what does this mean in terms of actual phones? There will probably be another generation of webOS phones. Palm was living and dying by the Pre and Pixi, which were first-generation products running a first-generation OS. HP’s resources will give the OS the kind of time it needs to spread its wings on time-appropriate hardware. Imagine what a webOS phone with WVGA resolution, with a Snapdragon processor, with a genuinely responsive interface would be like. We can forget the Pre Plus and start waiting for the Pre II.

The only awkward point here is that HP is an official partner with Microsoft for Windows Phone 7, which means that HP will have either competing phone lines, which would be odd, or that they won’t follow through with their commitment to release hardware with Microsoft’s new mobile OS with the next year or so.

Computers

With the purchase comes a wealth of intellectual property (patents) spanning decades, much of which concerns touch interfaces. HP has been extremely aggressive in developing touch interfaces for Windows machines with its TouchSmart line, and could easily incorporate some of Palm’s mobile tricks into its software. By and large, though, HP’s expansive computer lineup will remain unchanged.

Tablets

HP’s tablet strategy is heading down a dangerous road. The ancticipated HP Slate runs on Windows 7, a desktop OS, while much of the rest of ht eindustry seems to have opted out for mobile OS’s, HP hasn’t shown a ton of interest in Android in the past and their tablet plans have so far ignored Google’s OS, the presumed competitors to the iPad’s iPhone based OS. Which brings us to an exciting possibility of a webOS tablet. WebOS has a more intuitive interface than Android, and a better notification system than anyone else, and prodigious social networking abilities, on top of having a fair amount of apps. It’s compatible with the same mobile hardware that’s powering many of the first waves of Android tablets. The possibility is an awesome one.

The Bad

The real challenge here might come in reconciling the brand personalities. Palm’s products, regardless of how well they’ve sold, have always been innovative. The Pre was a breath of fresh air when it was released, HP on the other hand has tended to just follow the crowd. The products that do stand out, like the Envy laptop, have across as derivative. There’s also the unfortunate case of iPad, another HP acquisition that was left to rot. So will Palm fuel HP’s creative capabilities? Or will HP stifle the ingenuity that made Palm worth buying in the first place.

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