SAN FRANCISCO — Palm, a pioneer in the smartphone business that couldn’t quite make the comeback it needed, has agreed to be bought out by Hewlett-Packard for about $1 billion in cash.
The two Silicon Valley companies announced Wednesday that the deal will see HP pay $5.70 for every Palm common share. Palm had closed trading Wednesday at $4.63 but traded as high as $18.09 in the past 52 weeks. In after-hours trading, Palm shares jumped to $5.88 — meaning some investors were willing to bet another suitor will step forward.
Palm was founded in 1992 by Donna Dubinsky and Jeff Hawkins and helped originate the hand-held computing market with its Palm Pilot “personal digital assistants” in the 1990s.
But after Palm reshuffled itself repeatedly — it was bought by U.S. Robotics, a modem maker that itself was bought by 3Com in 1997, and then spun off again as its own company in 2000 — other companies took control of the market.
In recent years, as hand-held computers morphed into smartphones, Palm struggled to keep up as consumers flocked to such devices as Apple’s iPhone and Research in Motion’s BlackBerry. In the past year, phones that use Google’s Android operating software have added new competition.
Palm got into position for a turnaround last June with a sleek touch-screen smartphone called the Pre and well-reviewed operating software. But consumers were slow to embrace the Pre and its newer, smaller sibling, the Pixi. In the most recent quarter, Palm sold 408,000 phones. In its last quarter, Apple sold 8.75 million iPhones.
IDC analyst Ramon Llamas said HP’s deep pockets could help Palm catch up in a smartphone market that has taken on a furious pace.
“With HP backing them, I would expect things to get a lot faster,” Llamas said.
A greater role in mobile products would give HP chief executive Mark Hurd another way to enhance his company’s ability to be a wide-ranging player in consumer products and business technology services.
Palm’s new connection
Hewlett-Packard has agreed to buy struggling smartphone maker Palm for about $1 billion in cash.
What’s in it for Palm
The deal comes less than a year after Palm released its touch-screen Pre smartphone and fresh operating software — two things it hoped would be the key to revitalizing the company.
What’s in it for HP
The computer and printer giant plans to use Palm’s webOS operating software, which runs on the Pixi, below, and Pre smartphones, to become a fiercer competitor in the Web- connected mobile-device market.
Impact
Palm shares closed Wednesday at $4.63 after trading as high as $18.09 in the past year, then jumped in after-hours trading to $5.88; HP dipped 38 cents to $52.90.
