HP Buying Palm

Tweet

HP (the world’s biggest computer manufacturer) is going to buy Palm (the struggling mobile phone manufacturer). Palm has been in dire straits and was rumored to be courting several companies for a possible buy-out.

HP is no stranger to big deals, and the Wall Street Journal reports that HP CEO Mark Hurd is actually brazen about pulling off such deals. Probably the biggest was when they bought fellow computer maker Compaq for an incredible $25 bil in 2002. In 2008, they bought IT services firm EDS for $14 bil and bought 3Com last year for $3 bil.

HP is betting heavily on Palm’s webOS. TechCrunch snagged an interview with a senior VP at HP who says the computer giant’s intent is to “double down on webOS”. The WSJ praises the move, saying that HP can produce webOS phones which will stand out from the iconic iPhone and the crowd of Android phones. HP’s longtime rival, Dell, recently showed off a ton of new Android and Windows Phone phones – we can’t help but feel that that may of had something to do with this.

As I’m sure you’re aware, Palm’s been in trouble lately. They brought in Apple’s Jon Rubenstein who reinvented Palm with the Pre phone and new webOS. Both were well received by us press types, but allegedly haven’t been selling well. Other phone maker HTC and computer manufacturer Lenovo were rumored to be in the bidding for HP. HP paid a 23% premium on the stock price for Palm – a sign that perhaps they were outbidding another company (Lenovo?).

This buyout was well timed. Wall Street had expected Palm to make $165 million in revenue this quarter, but Palm said today (separately from the HP news) it would miss that and probably would only come in at $90 million. A wide miss by any indication. Including the 23% premium on the stock price and all of Palm’s debts they’re taking on, HP’s total price tag for their new purchase is a cool $1.2 billion. Honestly, it looks like HP overpaid for a struggling company – but rather than engineer an entire mobile phone division from nothing, they’ve got a complete one ready to go.

Do you think Palm was a good purchase for HP?