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Analysis Of HP-Palm Acquisition

HP turned the smartphone space on its head Wednesday with its surprise purchase of Palm. At first blush, the deal would appear to help both companies, but it is far from a sure bet to save Palm's line of webOS devices.
First: Palm's developer story doesn't come remotely close to that of the competition. We all know the numbers here. Apple's iPhone Apps Store has some 150,000+ apps, Google's Android Market has around 50,000, RIM's Apps World has 6,500. Palm's has a meager 2,000 or so. Apple and Google are already so far ahead of the others, it's possible the other platforms will never catch up. HP's buy-out of Palm does not improve the developer story at all. Without developers who are committed to writing apps, webOS can't have a future -- or at least can't have a future that is as full and rich as its competitors.

Second: Integrating the firm's is going to take time. There's no way the combined companies are going to be able to do anything to speed up the current device line-up. Palm still needs to sell phones. It has to get better hardware to market ASAP if it is going to do that. Seeing that Palm has really only created two new phones in the last 18+ months, I am not hopeful that it has something hiding up its sleeve. There's going to be a new iPhone by summer. The new BlackBerry OS will be available by September. Microsoft will introduce the new version of its mobile platform by November. Palm needs to be able to head these off and convince buyers that webOS is the way to go. It's not going to do that without better hardware. If Palm had good hardware in the pipeline, it wouldn't have sought out a sale so soon.

Third: Both firms have a history of making bad decisions and bad hardware. Two wrongs don't make a right. Just because HP will back Palm up doesn't mean that Palm's existing pipeline is any better than what we've already seen from either company. Whatever device happens to be the first to come to market that was developed jointly under both firms after the acquisition needs to be a smash hit on every level. Every feature will need to be class-leading from the get-go. I am not convinced they can do this.

Fourth: The competition is fierce and unrelenting. Killer new smartphones aren't being released once per quarter or every six months by Apple, RIM, Google and others, they're being announced nearly every week. Speed is a serious and real issue here. The competition is already fielding devices with 8- and 12-megapixel cameras. The Palm Pre has a 3-megapixel shooter, the Pixi a 2. They need to get new devices to market ASAP to head off the existing threats.

In the end, this deal does at least one thing: it gives Palm time. With HP's resources, it won't die a quick death and will have at least a fighting chance instead. But Palm needs to go from a featherweight to a heavyweight. It needs to bulk up and win a few rounds, or its going down for the count.