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Analysis Of HP-Palm Acquisition

Rubinstein began work on a brand new system that was different from the ground up. Taking advantage of all that the web and wireless networks have to offer, Palm announced webOS in January 2009. The OS looked so strong, Palm's outlook suddenly seamed bright again. The problem? Palm wrapped webOS in the Palm Pre, a device of middling design and build quality. It followed the Pre with the Pixi, another device of middling design and build quality. To make matters worse, it sod the devices solely through Sprint (which has its own problems).

The list of shoulda-coulda-wouldas goes something like this: Palm should have launched with every U.S. and foreign carrier possible. It should have moved faster to bring better devices to market. It should have aimed for the high-end instead of fielding $99 devices that -- on a spec level -- barely compete with feature phones.

The result? Palm isn't selling enough phones, it isn't making enough money, it needs to be propped up by some bigger, stronger entity with some cash to burn.

Enter HP, the supposed White Knight.

A few words on HP's history. HP made some really, really solid Pocket PC-based PDAs. In the early 00s, it was churning out solid hardware that was appealing and business friendly. They were expensive, and didn't have cellular radios, but they were good enterprise devices at the time.

But smartphones, as we know, pretty much killed the PDA market off entirely. HP's acquisition-merger with Compaq yielded some interesting fruit that unfortunately fell to the ground and rotted. HP has pushed out Windows Mobile-based smartphones under the iPAQ brand over the course of the last few years, but they've been mediocre at best. Not only were most of the unattractive handsets, they were not designed well and cost a lot of money. HP also made the mistake of making devices that would only work on AT&T's (then Cingular's) network.

HP has continued to make iPAQ smartphones, but I couldn't tell you who on earth is buying them. They're not bad, but they're not great either. Lacking any sort of carrier distribution, however, pretty much means they are DOA.

HP's story? It know smartphones are important, but it hasn't been able to execute. Its iPAQ's stink, and HP knows it can't sit back and cede this entire market to Apple, RIM, Microsoft, Google and others.

So, it only makes sense that HP would do the right thing for both itself and Palm and buy up the listing smartphone maker, right? HP gets a smartphone strategy with carrier deals and Palm gets more money to back it up. Sounds like a win-win. But is it?

Based on statements made by both Palm and HP, they think this is the answer. HP said quite clearly that it intends to invest in Palm's webOS and is already considering bring the platform to other form factors. Palm's CEO gets to stay the helm of the product he's built, and he's very excited about the future of Palm's products. But there are a few problems.

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