HP Buys Into The Smartphone Race With Palm Acquisition

Computer and networking giant HP has announced its definitive agreement to purchase Palm. The $1.2 billion purchase, expected to be completed in the third quarter, delivers Palm to a stable parent who seems ready and willing to push the mobile devices into broader markets, as well as extend the reach of WebOS beyond what Palm could do on its own.

For Palm, an HP acquisition is likely the best possible outcome for the company, given their current position in the market. By nestling under HP's wing, Palm gets out from under the constant investor and market scrutiny it has received in the last several months and can focus on broadening the depth and reach of its products.  With a public pledge to give Palm the R&D, sales, and marketing resources it needs, HP is clearly showing its commitment to the platform. This is a much better outcome for Palm than the other rumored suitors, many of whom likely saw an opportunity to purchase Palm's patent and IP portfolio, rather than as a platform to build on. The HP acquisition should also settle the nerves of third party developers wary of Palm's future.

Likewise, the Palm acquisition gives HP an immediate re-entry into the mobile device space.  Once near the top of the heap with its iPaq Pocket PC devices, the market transition to smartphones has left HP as an also-ran player, with only a token number of Windows Mobile devices in its product lines. The infusion of WebOS and Palm devices enables HP to get back into the mobile game with a high-profile platform, but on its own terms.  Beyond smartphones, HP also has a stable of connected devices for the home-user, such as smart displays and the forthcoming Windows-based Slate tablet, that could certainly take advantage of the WebOS platform.  

For enterprises, the impact of the Palm is less clear.  While the current Pre and Pixi devices from Palm are clearly consumer focused, the devices does offer links to corporate Exchange servers. The smartphone market as a whole is taking a very consumer-focused approach to even enterprise mobile devices, given both the rise of Apple's iPhone in the hands of enterprise users, as well Blackberry's push to be more consumer friendly. The current market, as well as the muscle of HP's marketing department, affords Palm the opportunity to retake some of the ground it has lost to competitors.

There is also the potential for leveraging WebOS and Palm devices to add value to its unified communications portfolio, brought in to HP from its recent acquisition of 3com, but with the ink still wet on that purchase, it will take some time to work through integration.  Brian Riggs, research director for Enterprise Communications for Current Analysis, agrees, noting "The acquisition of Palm may be strategically important to HP in terms of broadening its addressable markets, but it has minimal implications for HP's role in the unified communications market. Palm could in theory allow HP to deliver new mobility solutions presently unavailable in its portfolio of enterprise products. This - again in theory - could impact the enterprise voice solution delivered by 3Com, which HP so recently acquired. However, HP has yet to indicate how - or if - it plans to leverage 3Com's unified communications assets."  In the end, there is a lot of potential for Palm to leverage its technology throughout HP.  While it remains to be seen whether Palm and HP can capitalize on this potential, the buyout secures Palm will no doubt reignite some enthusiasm for their products.