Update: HP to buy Palm for $1.2 billion

Palo Alto, Calif. — HP will purchase smart phone provider Palm Inc. (Sunnyvale, Calif.) for $1.2 billion. The acquisition is expected to accelerate HP’s growth in the $100+ billion connected mobile device market by leveraging Palm’s webOS platform with HP’s global scale and financial strength. The transaction is expected to close during HP’s third fiscal quarter ending July 31, 2010.

HP said 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.

“HP’s announced acquisition of Palm gives it an entry into the fast-growing smart phone market but the move has implications far beyond cell phone hardware,” said Tina Teng, senior analyst, wireless communications, for iSuppli, in a statement. “The battle for dominance in the high-tech world increasingly is focused on the mobile Internet. Any company that can manage to control the flow of revenue from wireless data users — coming from subscriptions, ad sales or app store revenues — stands to benefit enormously. With the Palm purchase, HP has positioned itself as a player in this great technology battle,” she added.

Palm was the world’s 10th-largest smart phone brand in the fourth quarter of 2009, accounting for 1.5 percent of unit shipments, according to iSuppli. While Palm has made limited headway in the smart phone market so far, the company’s Pre smart phone offers significant advantages compared to Apple’s benchmark iPhone, according to the market researcher.

Smart phones represent the hottest segment of the cell phone market, reports iSuppli. While global smart phone shipments are set to rise to 247 million units in 2010, up 35.5 percent from 182 million in 2009, total cell phone shipments are projected to climb to 1.28 billion units in 2010, up 11.3 percent from 1.15 billion in 2009, according to the market research firm.

“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 in a statement. “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.”

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 transaction has been approved by the HP and Palm boards of directors.

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

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