Will H-P keep Palm in smart phone market?

Jun 10, 2010 By Benjamin Pimentel
Palm logo

After unveiling its $1.2 billion plan to buy smart phone maker Palm Inc., Hewlett-Packard has sent somewhat confusing signals about its intentions to remain in the fast-growing but highly-competitive business.

Analysts, however, believe the high-tech giant will stay in that market -- while also adapting Palm's well-regarded mobile operating system for other portable devices.

Speaking to analysts last week, Chief Mark Hurd caused a bit of a stir when he reiterated the tech giant's rationale for the planned merger with ., saying H-P isn't buying the company "to be in the smart phone business."

"And I tell people that, but it doesn't seem to resonate well," Hurd added at the Bank of America conference in New York.

But his comment resonated in a way H-P didn't seem to expect, as it prompted speculation that the tech giant was planning to exit the smart phone market once it takes over Palm.

H-P moved quickly to clarify its CEO remark, saying that in connection with its bid for Palm, the company sees "an array of interconnected devices, including tablets, printers and, of course, ."

But the level of the company's commitment to the business may be questioned. Hurd had also said H-P is not "going to run off and spend billions of dollars trying to go into the smart phone business," adding, "That doesn't in any way make any sense."

In smart phones, H-P faces an uphill battle. The market is ruled by popular product lines such as the BlackBerry by and the from Apple Inc. Other phone makers such as HTC and Motorola are also quickly picking up share.

Palm, by contrast, does not even rank in the top five handset suppliers in the U.S. market. And the company's sales have taken a beating of late, as such as the Pre and Pixi have seen only limited interest at carriers such as Verizon and Sprint.

H-P has stressed the value of Palm's intellectual property, particularly its WebOS operating system, especially at a time of rapid growth in mobile computing.

"Imagine that being a web-connected environment where now you can get a common look and feel and a common set of services laid against that environment," Hurd said last week. "And for us, that is a very, very attractive value proposition."

However, H-P also has acknowledged the smart phone market's importance. Hurd himself told analysts during H-P's last earnings call, "Clearly that's a $45 billion total available market that is growing and so that is an attractive market."

And despite the buzz caused by Hurd's statement, many analysts also believe H-P will not head for the exit once it gobbles up Palm.

"I don't believe H-P will exit the smart phone market," analyst Tim Bajarin of Creative Strategies Inc. said. "They understand that the smart phone is just a small PC that happens to fit into your pocket. I am sure that they will continue to develop a smart phone platform that will be part of H-P's device eco system."

Ramon Llamas of IDC also noted that the smart phone market is "still in it nascency," and H-P will get a bigger foothold by buying Palm.

"The gold from this acquisition is definitely the WebOS," he said. But Llamas also added, "I don't see H-P turning off the faucet on smart phones all together. ... Mobile computing is where it's at. ... There are too many indicators saying, 'Go smart phone.'"

Kaufman Bros. analyst Shaw Wu agreed, arguing that, H-P has much to gain from the merger.

"It's a building block," he said. "And there's not a whole lot out there. A lot of companies can't afford to make this bet. They can afford it. And it's a potential shot at greatness."

He added: "If it doesn't work, it's not the end of the world. It just a month's cash flow."

Explore further: IBM posts lower 1Q earnings amid hardware slump

5 /5 (1 vote)
add to favorites email to friend print save as pdf

Related Stories

Palm's phone sales slump and its stock dives

Mar 18, 2010

(AP) -- Palm Inc. reported sales figures Thursday that showed it's having a difficult time getting consumers to pay attention to its phones in a market dominated by iPhones and BlackBerrys. The company's ...

Apple gains share in smart-phone market in first quarter

May 11, 2010

The growing power of Apple Inc. in the mobile-device market was underscored in two ways Friday: in a report from IDC showing the iPhone gaining market share, and in a fresh lawsuit from cell-phone giant Nokia Corp.

Recommended for you

IBM posts lower 1Q earnings amid hardware slump

7 hours ago

IBM's first-quarter earnings fell and revenue came in below Wall Street's expectations amid an ongoing decline in its hardware business, one that was exasperated by weaker demand in China and emerging markets.

New US-Spanish firm says targets rich mobile ad market

13 hours ago

Spanish telecoms firm Telefonica and US investment giant Blackstone launched a mobile telephone advertising venture on Wednesday, challenging internet giants such as Google and Facebook in a multi-billion-dollar ...

Technip, Heerema win third giant Angolan oil contract

16 hours ago

The ultra-deep Angolan offshore oil project called Kaombo generated the third huge contract in three days on Wednesday when French group Total picked two firms to carry out underwater engineering worth $3.5 billion.

User comments : 1

Adjust slider to filter visible comments by rank

Display comments: newest first

5 / 5 (1) Jun 11, 2010
I hope HP doesn't let WebOS wither on the vine. It's a nice phone OS. My girlfriend has a palm Pre and although I hate the small keyboard it's fine for her small hands. It's a very functional little smartphone.

Keeping WebOS in the picture will help keep Android and Apple on their toes and pretty soon our phones will be so amazing most of us wont ever need any human companionship at all. Oh yeah -- that time is here already!

More news stories

Microsoft CEO is driving data-culture mindset

(Phys.org) —Microsoft's future strategy: is all about leveraging data, from different sources, coming together using one cohesive Microsoft architecture. Microsoft CEO Satya Nadella on Tuesday, both in ...

Floating nuclear plants could ride out tsunamis

When an earthquake and tsunami struck the Fukushima Daiichi nuclear plant complex in 2011, neither the quake nor the inundation caused the ensuing contamination. Rather, it was the aftereffects—specifically, ...

Patent talk: Google sharpens contact lens vision

(Phys.org) —A report from Patent Bolt brings us one step closer to what Google may have in mind in developing smart contact lenses. According to the discussion Google is interested in the concept of contact ...

Quantenna promises 10-gigabit Wi-Fi by next year

(Phys.org) —Quantenna Communications has announced that it has plans for releasing a chipset that will be capable of delivering 10Gbps WiFi to/from routers, bridges and computers by sometime next year. ...