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4/29/2010
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Dave Methvin
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HP-Palm Deal Reinforces Microsoft-HTC Pact

This week has seen two big developments in the business of mobile technology. The first was Microsoft's intellectual property licensing agreement with HTC, the maker of Android devices including Google's Nexus One phone. Next came Hewlett-Packard's offer to buy Palm Computing for $1.2 billion. Turns out that is more good news for Microsoft too.

This week has seen two big developments in the business of mobile technology. The first was Microsoft's intellectual property licensing agreement with HTC, the maker of Android devices including Google's Nexus One phone. Next came Hewlett-Packard's offer to buy Palm Computing for $1.2 billion. Turns out that is more good news for Microsoft too.Some observers have wondered whether it made sense for anyone at all to rescue Palm; the company has been on a steep decline under a three-front assault by iPhone, Android, and (soon) Windows Phone 7. Palm's operating system may not be able to compete, but I don't think that's what HP wants by making this offer. Palm has been an innovator in mobile computing for more than 15 years, and in the process has built a large intellectual property portfolio that includes more than 450 granted patents and nearly as many that are pending. In a New York Times print article, managing partner Pete Conley at MDB Capital estimates the worth of Palm's IP at $1.4 billion dollars; if that number is in the right ballpark then everything else in the Palm deal is gravy for HP.

HP is a minor player in mobile computing at the moment, but they're not ready to give it up. The Palm acquisition puts them seriously back into that game. Up to now, HP has been a pretty faithful Microsoft partner, even when Microsoft broke a promise to HP during the Vista Capable logo debacle. HP's current iPaq phones use Windows Mobile 6, so it would seem like Microsoft has the inside track to HP when Windows Phone 7 comes out. Then again, not so fast.

Purchasing Palm gives HP several other options for a new generation of phones. It's possible that they could use Palm's current OS on their phones, but to me that seems the least likely outcome. Instead, HP seems more likely to use either Google's Android or Microsoft's Windows Phone 7 as their platform. HP and Microsoft have a long-standing patent cross-licensing agreement. Even if HP builds an Android phone, it wouldn't be subject to the kind of financial shakedown that HTC just suffered at the hands of Microsoft. That puts HP in a good position, at least IP-wise, to play in the mobile device market. But it also helps Microsoft, because that same agreement makes Palm patents fair game for Windows phones.

It's possible that HP could even go on the offensive like Microsoft is doing, making calls to cell-phone makers and demanding they take licenses for relevant patents that HP now holds by way of the Palm play. Companies like HTC have come out of nowhere over a short few years, and can't defend themselves by cross-licensing patent portfolios with Microsoft or Apple the way a company like Nokia, Toshiba, or Motorola might do. Seems like that's going to be costly for them.

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