When I heard the news last week that HP was buying Palm for $1.2 billion, I immediately thought, “Of course!  Tom Bradley, who runs HP’s Personal Systems Business, used to be CEO at Palm during the Treo heydays.  He knows the value of Palm and gets another chance to make Palm a great business again.”

This is going to turn out to be a very successful acquisition.  Here’s why.

First, HP has tremendous scale.  They are a global company with products and services sold in every major geography.  They have a successful line of notebooks & netbooks under the Presario and Compaq brands. They have established relationships with many wireless operators, often helping them run their data centers.  And, they have a large services organization as a result of acquiring EDS.  What they don’t have is any successful business in SmartPhones and handheld products.

With the acquisition of Palm, HP gets webOS – a very solid SmartPhone OS that already includes multi-tasking, great sync services and easy-to-consolidate information from multiple sources across applications (via Palm Synergy).  Developers love webOS as it allows them to leverage Web standards.  What developers needed was a large, global market place so that their development efforts would have a chance to pay off. HP now provides that.

HP also gets Jon Rubenstein who was directly involved with developing the iPod and the iPhone while at Apple and an experienced management team.  Jon suffered from lack of stability and resources at Palm to expand the product offering and build an applications & services platform.  With HP, Jon and his team will be able to pull out all stops and develop insanely great webOS products – from SmartPhones to tablets to wireless internet devices to home theater systems.  And HP can market and distribute them worldwide.

It will take awhile for HP to integrate Palm into their organization, hopefully without killing off their creativity.  But, I’d expect you’ll start to see the results of the integration by the end of this year or certainly by the first half of next year.

In my April 14 Inside Mobile column, I pointed out that Palm needed to: 1) improve the products – create products that are even better than the iPhone and iPad, 2) improve their branding – kill Pre and go back to using Treo, as well as create new webOS branded products, 3) build a ‘next generation’ App Store that leverages services in addition to products – something in which HP excels, and 4) find a strong partner that brings stability and resources to the table – again, something that HP provides.  HP will allow each of these recommendations to be successfully implemented.

In years past, HP tried to produce -- and still sells -- a line of iPAQ SmartPhones based on Microsoft’s Windows Mobile OS.  However, the products were uninspiring, undifferentiated and under-promoted.  With the Palm brand already known for ease-of-use and webOS being one of the best small device operating systems yet created, HP has the opportunity to create a line of very compelling mobile products, have a vibrant and successful developer community (again), and be able to partner with other HP divisions to successfully market and sell Palm products around the world.

I would expect that HP will utilize the Palm brand for all webOS-based products. You’ll likely go into a Sprint, Verizon Wireless or AT&T store and ask for the Palm phone or into Best Buy to purchase an Palm tablet (both with HP identity).  There will be a number of different models to choose from. This is consistent with HP’s branding, where major sub-brands are used to define categories such as Presario & Compaq for notebooks and OfficeJet & Photosmart for business and personal printers.

HP will need to drive a major development effort to provide a Palm Platform that includes apps development across all Palm products and an Apps Store that will work on the device.   Perhaps most importantly, HP will have to build content relationships that will enable music, video, books and other content classes to be offered to customers.  That’s a big task, but HP should have the resources to help make this happen.

I know Todd Bradley and admire his management skills.  This acquisition is like giving an energetic and creative kid a big box of Legos.  He and the HP/Palm teams are going to build some amazing things with Palm and webOS.  The really exciting products will come to market in a year or two. Long term, it’s entirely possible that Palm might become one of the largest business units in HP.

HP is back in the mobile handheld game.  HP now goes up against Apple, Google, Nokia and RIM – all formidable competitors.  But, the real beneficiaries of HP acquiring Palm are the customers that are going to get easy-to-use products that will compete head-on with the best products from other vendors.
Yesterday, the list of top mobile firms didn’t even mention HP.  Today, HP is clearly poised to become a major player.  I personally can’t wait to see the results of the combination.  The best days of Palm are yet to come.

Written By:

J. Gerry Purdy, Ph.D.
Principal Analyst
Mobile & Wireless
MobileTrax LLC
gerry.purdy@mobiletrax.com
404-406-5309
 
Disclosure Statement: From time to time, I may have a direct or indirect equity position in a company that is mentioned in this column.  If that situation happens, then I’ll disclose it at that time.