The Internet is going mobile, and computer maker HP HPQ-N is placing a bet on that trend with a $1.2-billion (U.S.) deal to buy flailing smart phone firm Palm PALM-Q
Palm makes wireless phones that have earned good reviews from technology enthusiasts but sell poorly and this spring put itself up for sale, with some analysts pointing to Waterloo, Ont.’s Research In Motion Ltd. and Chinese computer maker Lenovo as a potential buyers. Instead, HP surprised everyone when it announced the deal late Wednesday.
With the acquisition, the American technology giant is gearing itself for a fight with three other titans, including Apple Inc. and its massively popular iPhone, RIM, and rival computer maker Dell Inc., which, like HP, is an upstart in the mobile space and poised to start selling a Dell smart phone later this year.
All the companies are working in the belief that Internet users will continue to migrate away from desktop and laptop computers toward mobile devices that can download data quickly on wireless carriers’ upgraded networks. Earlier this month, Mary Meeker, the Morgan Stanley technology analyst, issued the latest version of her “state of the Internet” report and predicted a rapid ascension of the mobile internet market.
In 2013 or 2014, Ms. Meeker predicted, mobile usage will surpass computer-based Internet connections; by 2015, she wrote, 2 billion people will be using mobile devices for the Internet, compared to 1.7 billion using desktops to go online.
HP, with a market capitalization of $126-billion (U.S.) – the 19th-largest public company in the United States – touted the Palm deal as a move to help it compete more aggressively in a smart phone market that is “large, profitable and rapidly growing,” Todd Bradley, an HP executive vice-president, said in a statement. “HP intends to be a leader in this market.”
Duncan Stewart, a Deloitte Canada analyst, said HP is doing more than chasing Dell, Apple and RIM.
“It’s not just a case of, ‘Well, they’re doing it so it’s a good idea,’ ” Mr. Stewart said. “The reality is there’ll be hundreds of millions of computer-like devices – whether they’re called phones or smart phones – and they’re computing platforms that companies like HP want a piece of it.”
Another key factor is integration. Apple has succeeded in large part because its products – the iPhone, iTunes and its Mac computers – work together well. With its own phone, HP will attempt to create a similar seamlessness.
But some critics weren't impressed. Forrester analyst Charles Golvin said HP's tack was right but called buying Palm “the wrong move.” Mr. Golvin said the technology and brand won't help HP.
But among the crowd of BlackBerry developers and partners gathered at RIM's annual enterprise conference in Orlando, there was general consensus that the Waterloo-based firm was at best a long-shot to try for a Palm purchase.
One developer noted that, outside of patents and other intellectual property, Palm's most useful property is its handsets. However, he added, RIM has spent years and millions of dollars on its own sets, and adding Palm's units to the mix would at best be an awkward fit.
HP's purchase does represent some threat to RIM, another developer said. With a phone-maker as part of its arsenal, HP can now offer end-to-end solutions for business customers, providing everything from servers to corporate cell phones.
The risk to RIM is that some enterprise clients will opt out of the BlackBerry service and instead go with an all-in-one solution from HP, the developer noted. However, the developer added that RIM is far ahead of its competition in certain key areas – for example, retaining data for legal and regulatory reasons – that competition from an HP-Palm service represents only a limited threat.
