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Summary:

With Palm living on borrowed time after posting yet another horrendous quarter and warning that results for the current fiscal period will also fall short of expectations, we take a look at some of the companies that might sweep in and pick up the beleaguered firm.

Palm shares plunged in late trading Thursday after the company posted yet another dismal quarter and warned that revenue for the current one will fall far short of Wall Street expectations. The company will have to take substantial charges to help its carrier partners eat through excess inventory, and whatever luster once existed for its flagship Pre is long gone. The question now is, who’s going to pick up Palm?

Palm’s last-ditch gamble on webOS has been a disaster. The operating system — which debuted last summer on the Pre — has received solid reviews, but an utter lack of effective marketing from Sprint — and more recently, Verizon Wireless — shackled handset sales. And an upcoming partnership with AT&T — which looked to be Palm’s last chance at redemption — is reportedly fizzling already after the carrier delayed the launch of webOS handsets, slashed its order and cut its marketing budget.

So what are Palm’s options? CEO Jon Rubinstein is projecting a “stay the course” attitude, saying better training of Verizon Wireless sales staffers will begin to pay off — a questionable theory given the flat-line demand for the Pre Plus and Pixi Plus so far. Producing a tablet would be an interesting strategy, as James over at jkOnTheRun suggested yesterday. But the market for tablets is still very uncertain, and there’s little reason to believe Palm can move a different kind of hardware when it can’t sell phones. So a suitor will likely sweep in and pick up Palm, snatching up webOS — the company’s most valuable asset — and a sizable patent portfolio. Here’s a quick rundown of the most likely (or most highly speculated) candidates for acquiring Palm — including their odds of doing so:

  • Google : The most intriguing play on the board, Google might be compelled by Palm’s patent portfolio, as Gizmodo noted yesterday. What’s more, Google and Palm both operate Linux-based mobile operating systems, which would make it easy for Google to cherry-pick the best features from webOS and add them to Android. Google could easily afford Palm, and as a bonus would keep it from falling into the hands of a competitor. Odds: 7-1
  • Dell : The Texas computer vendor joined the smartphone space a few months ago, launching handsets in Brazil and China, and will soon launch an Android-based device through AT&T. But its late entry means Dell will have a hard time differentiating its hardware, and coming to market with its own mobile operating system, app store and developer community could be a great way to stand out from the crowd. Odds: 7-1
  • Hewlett-Packard: HP’s tiny smartphone business is dissolving in the superphone era. Picking up what amounts to a turnkey mobile OS would be a huge — if costly — move to attract attention and breathe life into its mobile business. Odds: 11-1.
  • Nokia : Nokia has long been mentioned as a potential buyer for Palm, but successfully marrying the two has become an increasingly difficult proposition. Nokia already claims the world’s most popular smartphone OS in Symbian, and its Maemo — um, sorry, I mean MeeGo – operating system appears to be its long-term strategy. What’s more, Ovi has gained impressive traction in recent months. Adding another platform to the mix would only serve to distract Nokia just as it finally appears to be regaining its focus. Odds: 25-1
  • Motorola : Another hardware maker that might be compelled by the idea of owning its own OS, Motorola’s $8 billion in cash ensures plenty of capital to pocket Palm. Yet despite what Om suggested earlier this year, taking on a mobile operating system would likely be more than Motorola could handle, given its difficulty in regaining its once-dominant market share in smartphones. Marriages of two weak players from different spaces rarely end up happy. Odds: 30-1
  • Microsoft : Palm and Microsoft seemed like a great fit just a few months ago. But that was before the gang from Redmond went public with its plans to scrap Windows Mobile in favor of Windows Phone, an impressive, consumer-targeted platform set to debut late this year. Windows Phone may fail gloriously, but there’s no reason to bring another OS into the fold — and webOS is largely considered to be Palm’s most valuable asset. Odds: 35-1
  • Cisco : An acquisition of Palm would enable Cisco to immediately expand beyond infrastructure into the mobile consumer market. Such a move wouldn’t exactly be unprecedented for Cisco, which last year bought the maker of Flip Video camcorders for $590 million, but maintaining a mobile operating system is a far more sophisticated endeavor than simply churning out camcorders. Odds: 40-1.

This is only a partial list, of course, and new potential suitors are sure to emerge as Palm begins to circle the drain. The clock is ticking, and there’s almost no hope Palm can reverse course at this point. So someone in the mobile space might be able to do very well by picking up a dying company at a cut-rate price.

Related content from GigOM Pro (sub req’d):

Could Games Redeem Windows Mobile and Palm’s webOS?

Image courtesy Flickr user nathangibbs.

  1. Jacob Varghese Friday, March 19, 2010

    You’re missing the company I think would be the most logical suitor – Samsung.

    Samsung has developed the Bada platform. Palm’s IP could get a valuable boost from incorporating WebOS into Bada.

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  2. Jacob Varghese Friday, March 19, 2010

    You’re missing the company I think would be the most logical suitor – Samsung.

    Samsung has developed the Bada platform. Bada would get a valuable boost by incorporating some of the great features from WebOS into Bada.

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  3. RIM also should probably be on the list. I don’t see them being a large player overall, but a marriage of RIM’s hardware tech and Palm’s software would be a nice, refreshing, and business centric phone. Maybe I believe this only because I feel that the existing BB OS is awe-uninspiring at best.

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  4. What about Apple ? They would eventually be able to access so many talented developers there (most of them ex Apple employees)…

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    1. in that case Apple is better off poaching (and cherry pick) employees, because a lot of Palm’s goodwill and support operations are of no value to them

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  5. Robert Scoble Friday, March 19, 2010

    you guys are great at projecting gloom and doom – real writers find the nuggets of truth and present a balanced story of challenges, with opportunity – how do I unsubscribe?

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  6. Can’t say that I saw “an utter lack of effective marketing from Sprint” – at least on television. How many times have we all seen that Sprint ad with the girl taking a call on her Pre while listening to Pandora Radio? I don’t have any numbers to back it up, but it seems like there’s been a ton of Sprint/Pre advertising.

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    1. You’re right that there have been some decent ads, Matt, but I haven’t seen anything approaching Apple’s fantastic campaigns (which brilliantly highlight not just what the iPhone can do but how it can enhance your life) or even the Droid campaign (which effectively demonstrated the ways the gadget is more functional than the iPhone and created an impressive buzz). I just don’t think there’s been a cohesive, well-executed campaign to support the launches through Sprint or Verizon.

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      1. OK, sure, they didn’t do as good a job as the Droid campaign did, but still – an “utter lack of effective marketing” struck me as hyperbole – their ads were pretty good (the fact that I even remember them says something), and they were ubiquitous in prime time for months.

        One thing I have to agree with you on – it would be VERY interesting if Google were to acquire Palm. Far more so than Dell or MS, who have more mature hardware strategies already.

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  7. Some good ideas here; thanks for the input, guys. A few responses, keeping in mind that I’m not ruling anybody out in what increasingly looks like the Palm Sweepstakes:

    I think the Bada platform indicates Samsung’s desire to work with a variety of operating systems rather than invest in a single OS, which is why they’re not on the list.

    RIM and Palm seem like a good fit at first glance, but I just don’t see RIM scrapping a BlackBerry OS that has a massive footprint no matter how inferior (or, yes, awe-unispiring) it might be compared to Android and iPhone.

    Apple is another intriguing candidate and obviously has the cash ($25B) to get a deal done. But the software won’t do them any good, and JT makes a good point about poaching employees. The only real motivation I see for Apple is buying Palm for the patent portfolio and then killing the company, and I don’t think that’s enough to merit an acquisition.

    Would love to hear more thoughts.

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    1. its actually 40B as of 2010 Q1.
      Apple needs those patents just like everyone else. Perhaps Apple can buy the company get the patents and spin off WebOS to HTC

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    2. Hello Colin, great article as always (You should post more often! ;-) )
      I think that RIM is the perfect fit:
      as mentioned by Braden, the BB UI is still old-school and is outdated…and will struggle with increasing competition from consumer-oriented smartphones (And RIM IS aiming at the consumer market)

      WebOS consumer potential can take the BB UE to a new/modern level:
      – Slick UI optimized for multitasking apps
      – Web-based framework
      – Webkit web browser with HTML5 support
      – Integration of social networking into device’s UI.

      Sure the BB OS is proprietary…and On the radio firmware side, BB has a custom made for UMTS:as a result it has to be coupled with older gen XScale apps processor.

      They well to jump to a new gen OS anyway, as they can’t keep on optimizing the same old firmware/software on that same old hardware… there lies the opportunity to port legacy BB software to a Linux/Web OS.
      And the Torch acquisition shows that RIM is ‘open’ to other technologies…

      As far as I am concerned, I have a iPhone, but will buy a Pre when available in France (April 2010, Can you believe that?!), I have tested the device: it is great and I am a total geek… will use it as my second phone.

      I just hope that Palm can make it until April… ;-)

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  8. I constantly browse online using an ipod touch with wifi at home, and using the pre with 3G everywhere else, and have to say the browser SUCKS compared to the ipod/iphone. So many little bugs on the pre browser, plus the smaller screen make for an awful browsing experience. Despite multi-tasking, I wouldn’t recommend the pre to anybody. It would be a blessing if Google scooped them up.

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  9. The Palm death watch. Sad.
    But not unfair.

    I think your odds are wrong, however. I don’t see any reason why an existing smartphone player should buy Palm. Too little gain.

    Better for a hardware and/or PC hardware company to enter this growth market (so, HP, Dell, or some company in China I’ve never heard of).

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  10. Worth mentioning that Palm Market Cap is ~693.67M today so even with a premium, the cost to acquire would be < 1 B, unless their is a lot of debt on the balance sheets, and < 1,000 employees so wind down costs are not significant.

    I’m not sure if the WebOS is a hugely useful asset, given the low cost of going the Android OS route, otherwise HTC would be interested. If you already have a OS but need a more web-centric ones, then it has value. (see RIM or Nokia)

    The handset hardware expertise might be useful to a company, like CISCO, that wanted to break into the phone market.

    So it leaves the patent portfolio as a Asset. And this would most benefit Google, in their fight with Apple.

    So I would expect either Google, RIM (who bought Torch Mobile for their WebKit-based mobile expertise last year), or Nokia (in a bid to stay relevant) to scoop up Palm.

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  11. How about Yahoo!? They have the online properties to make the OS more usable, and if they pulled it off (a long shot, but worth $700mm for the chance) they could help ensure the value of these properties as the world shifts to mobile.

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    1. Sorry, they have the properties to make Palm OS more useful.

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  12. thomascruise Friday, March 19, 2010

    What about IBM? Now wouldn’t that be interesting. Getting back to the biggest computing market ever. (they don’t have the balls.)
    And Sony? Japan needs a kick in the ass and an operating system.
    And, dare I say, Baidu. Now that would be really interesting. Release a bphone (b for badass) in China and Asia. China Inc would love it.
    Finally, you forgot Apple. They want some of the talent and technology too.

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  13. I remember the hype at CES and CTIA from a couple of years back. I guess that’s all it was.

    You can scratch Google, HP, Nokia, Motorola, and Microsoft immediately off the list.

    Android is a success and doesn’t need to add the patents to its portfolio. Nokia knows how to make great phones; just not how to market them. It’s Palm with deeper pockets and purchasing the company wouldn’t add any value. HP growth focus isn’t in hardware. That’s why they’ve let there mobile phone operations languish. Motorola has a success with the Droid and is currently distracted trying to figure out how to break itself up. Motorola won’t be making any acquisitions anytime soon. Microsoft’s is focusing on Series 7 and needs a major success there. Imagine how the analysts would jump on them if they even dreamed of acquiring Palm.

    Some analysts came out today with a target price of $0 for Palm. This only means they’ll be acquired by someone. At such a low market cap, it could be a second tier manufacturer like Benq or Philips. Maybe even Sony Ericsson.

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  14. HTC. It would give them an exit from a patent fight over Android they are going to lose.

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  15. Good article Colin. I would add few more points which were missed by one and all tech blogs. First is the WebOS platform. Folks are interested in patents and dismissing the WebOS. Its the only platform which can tap into the 150K apps developed for iPhone. palm created pdk will help the iPhone developers port their 3D games on webos in couple of days. That is a huge advantage for anyone wants to compete with Apple. Second point is folks wrote about Nokia to Motorola as potential suitors of Palm but totally missed another giant. I would add Sony to the list. Nokia, Microsoft , RIMM and Samsung have their own platforms. Moto is happy with Android (Om might disagree). Dell is going with Google. That leaves HP and Sony. Sony is not new to the mobile game. They just, just need a good software to backup their excellent hardware. Palm is a good fit for them.

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  16. I think that licensing WebOS can save Palm.

    WebOS is aguably one of the better mobile operating systems out there; it’s very polished and sleek. Palm has also developed a fantastic SDK for WebOS; just look at the apps demoed during their CES presentation.

    If Palm takes the WinMo/Android approach, hardware manufacturers will do great things with the platform (imagine a snapdragon phone running WebOS!) and developers will be more inclined to develop for Palm’s offering if it has more market share (like Android has gained thousands of apps and eaten up marketshare as more manufacturers adopt it).

    Palm’s expenses would drop, since they could theoretically stop making devices. They would have no more manufacturing costs, and they could technically ditch their hardware team.

    They could charge manufacturers for the software and perhaps make a recurring revenue model out of it (I don’t know much about that, though).

    WebOS is too good a platform to deep six; it must get into as many hands as possible to survive.

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  17. Google by far has the most to gain out of acquiring Palm. They are already well known for assimilating companies that would be good for their business. (And the patents would be good… even if it just means that no one else will be able to say “we have a patent on this you pay us or else”.) Despite Palm’s steady down hill decline, WebOS is a fluid platform and Palm continues to have loyal fans. Google would do well to win them over and acquire new developers for Android in the process.

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  18. A patent troll should take over and make money from Apple and Google for every smartphone sold.

    Apples dialer screen is a ripoff of a palm patent

    I bet the troll could make more money – sad times that we do live in..

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  19. [...] of the Palm acquisition scenarios envisioned by Colin Gibbs at GigaOM seem only remote possibilities. Gibbs, for example, lists Dell and HP as potential acquirers of [...]

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  20. [...] 22, 2010, 12:00pm CDT No Comments            0 While many — including the stock market — are predicting Palm’s demise, the company rolls on. Timed nicely with the CTIA [...]

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  21. Or perhaps a phone company feeling squeezed out of mobile by Apple and Google – Telefonica? Orange ? BT ? They all have deep pockets.

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  22. [...] March 2010: Who Will Pick up Palm? [...]

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