Strategic CIO // Executive Insights & Innovation
Commentary
3/2/2010
11:31 AM
Bob Evans
Bob Evans
Commentary
Connect Directly
RSS
E-Mail
50%
50%

Will HP Buy Struggling Palm?

Hewlett-Packard does sell smartphones-just not very many of them, and the numbers are shrinking: $25 million in handheld sales for the quarter ended Jan. 31 versus $57 million in the year-earlier quarter. So now that Palm's stumbling fortunes raise doubts about its ability to survive on its own, would it make sense for HP to jumpstart its smartphone business by buying Palm?

Hewlett-Packard does sell smartphones-just not very many of them, and the numbers are shrinking: $25 million in handheld sales for the quarter ended Jan. 31 versus $57 million in the year-earlier quarter. So now that Palm's stumbling fortunes raise doubts about its ability to survive on its own, would it make sense for HP to jumpstart its smartphone business by buying Palm?"Last week, investors saw about half a billion dollars in the market value of smartphone developer Palm Inc. disappear. Poof. Gone. Bye-bye," wrote MarketWatch.com's Therese Poletti this morning.

And since that sell-off was precipitated by disappointing sales results from a bet-the-company product strategy, Palm's got some very big decisions to make, Poletti wrote:

For those counting on a big Silicon Valley turnaround under Palm's new management team, a big cash infusion in late 2008, and a well-received product lineup that started with the Pre-launched, fittingly on the anniversary of D-Day-hopes may be dashed.

"I think there is no second chance," said Trip Chowdhry, a Global Equities Research analyst. "They had a golden opportunity. . . . They just surrendered it."

So perhaps HP could be the savior. As Poletti says, smartphones represent a massive hole in HP's otherwise vast product line, which spans both the enterprise and consumer markets that Palm addresses.

With more and more companies realizing that their enterprise applications, data, and collaboration must fully embrace the needs of both a mobile workforce and increasingly demanding customers, a significant smartphone portfolio would seem to be essential for HP. As Poletti says:

But H-P is another story. While its PC business saw units of notebooks and desktop PCs grow in the double-digits last quarter, its handheld business fell. It sells expensive smartphones running Microsoft Corp.'s Windows mobile software under the old iPAQ brand it purchased in its acquisition of Compaq Computer.

The numbers are telling. Handheld sales in H-P's most recent quarter, ended January 31, fell to an abysmal $25 million, down sharply from $57 million a year ago.

Surely numbers-driven Chief Executive Mark Hurd is looking for ways for H-P to take advantage of the boom in smartphones. Buying Palm could be a way for H-P to get into the market for lower cost devices. It might have to abandon Windows, or offer two families of devices. H-P has often juggled competing product lines, diverse chip architectures and operating systems.

Hurd knows better than most that Palm's not a panacea, and that in spite of the hammering its market cap has taken in the past week, it wouldn't be cheap, either. But balanced against the need for his company to shift rapidly from bystander to contender in the smartphone space, Hurd might conclude that Palm, imperfect though it may be, would make an ideal acquisition for HP.

Comment  | 
Print  | 
More Insights
The Business of Going Digital
The Business of Going Digital
Digital business isn't about changing code; it's about changing what legacy sales, distribution, customer service, and product groups do in the new digital age. It's about bringing big data analytics, mobile, social, marketing automation, cloud computing, and the app economy together to launch new products and services. We're seeing new titles in this digital revolution, new responsibilities, new business models, and major shifts in technology spending.
Register for InformationWeek Newsletters
White Papers
Current Issue
InformationWeek Tech Digest - July10, 2014
When selecting servers to support analytics, consider data center capacity, storage, and computational intensity.
Flash Poll
Video
Slideshows
Twitter Feed
InformationWeek Radio
Archived InformationWeek Radio
Join InformationWeek’s Lorna Garey and Mike Healey, president of Yeoman Technology Group, an engineering and research firm focused on maximizing technology investments, to discuss the right way to go digital.
Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.