HP rescues Palm with $1.2 billion buyout

Palm's financial worries appear to be over after HP announced that it plans to buy the company for $1.2 billion. The boards of both companies have approved the deal so, assuming regulatory authorities give the thumbs up, Palm is expected to be part of HP from the end of July.

Palm’s webOS operating system seems to be the main reason for HP’s acquisition, not least since its press release makes particular mention of it. The prediction is that it webOS will eventually make its way onto a range of HP devices, from smartphones and up — HP has apparently already tested the operating system for ‘scalability’, leading to speculation that it will be used instead of Windows 7 to power its forthcoming slate computer.

HP hasn’t yet announced what will happen to the Palm brand, but it’s hard to imagine that it will be dropped in favour of its own iPaq, at least in the consumer space (HPalm, anyone..?).

It’s also unclear what HP plans to do with its current line-up of Windows Mobile smartphones. HP has stated that it will continue to be a strategic partner for Microsoft, but a gradual move away from Microsoft’s mobile OS seems inevitable, the issue is clouded by the fact that HP is an official launch partner for the imminent Windows Phone 7 platform.

Still, as many pundits have pointed out, the acquisition of webOS has turned HP from a mere smartphone partner into a major player. While it’s still far too early to know how things will all work out, anyone who’s followed Palm from its early days will certainly be received to see the company get a lifeline.

Here's the press release:

HP to Acquire Palm for $1.2 Billion

Combination will accelerate HP’s growth within the more than $100 billion connected mobile device market

PALO ALTO and SUNNYVALE, Calif., April 28, 2010: HP and Palm, Inc. (NASDAQ: PALM) today announced that they have entered into a definitive agreement under which HP will purchase Palm, a provider of smartphones powered by the Palm webOS mobile operating system, at a price of $5.70 per share of Palm common stock in cash or an enterprise value of approximately $1.2 billion. The transaction has been approved by the HP and Palm boards of directors.

The combination of HP’s global scale and financial strength with Palm’s unparalleled webOS platform will enhance HP’s ability to participate more aggressively in the fast-growing, highly profitable smartphone and connected mobile device markets. Palm’s unique webOS will allow HP to take advantage of features such as true multitasking and always up-to-date information sharing across applications.

“Palm’s innovative operating system provides an ideal platform to expand HP’s mobility strategy and create a unique HP experience spanning multiple mobile connected devices,” said Todd Bradley, executive vice president, Personal Systems Group, HP. “And, Palm possesses significant IP assets and has a highly skilled team. The smartphone market is large, profitable and rapidly growing, and companies that can provide an integrated device and experience command a higher share. Advances in mobility are offering significant opportunities, and HP intends to be a leader in this market.”

“We’re thrilled by HP’s vote of confidence in Palm’s technological leadership, which delivered Palm webOS and iconic products such as the Palm Pre. HP’s longstanding culture of innovation, scale and global operating resources make it the perfect partner to rapidly accelerate the growth of webOS,” said Jon Rubinstein, chairman and chief executive officer, Palm. ”We look forward to working with HP to continue to deliver industry-leading mobile experiences to our customers and business partners.”

Under the terms of the merger agreement, Palm stockholders will receive $5.70 in cash for each share of Palm common stock that they hold at the closing of the merger. The merger consideration takes into account the updated guidance and other financial information being released by Palm this afternoon. The acquisition is subject to customary closing conditions, including the receipt of domestic and foreign regulatory approvals and the approval of Palm’s stockholders. The transaction is expected to close during HP’s third fiscal quarter ending July 31, 2010.

Palm’s current chairman and CEO, Jon Rubinstein, is expected to remain with the company.

[ HP]