Buying Palm Would Thrust HTC Into the Smartphone Spotlight

36 Comments

Palm (s palm) is reportedly seeking a buyer, and among the top potential suitors being named are HTC and Lenovo. Taiwan’s HTC would be the logical choice, as Palm’s innovative and intuitive webOS platform would make the handset maker a key player in the worldwide smartphone market, lifting it from its current role as supporting cast member.

HTC may not be a household name outside of Asia, yet it manufacturers 6 percent of all smartphones sold around the world. A longtime Microsoft (s msft) partner for Windows Mobile devices — it built the first smartphones for Redmond’s platform — HTC also designed and builds Google’s (s goog) Nexus One handset, which is arguably the best Android device available in terms of specifications. Other HTC handsets running Android include the original G1, MyTouch 3G, Droid Eris and Hero. With so much reliance upon HTC — Flurry says 61 percent of all Android phones sold are made by HTC — a sale of Palm could mean Google would have to find a new hardware partner as HTC would likely leverage Palm’s operating system for its own brand of handsets.

But hardware isn’t HTC’s only area of expertise. The visually appealing HTC Sense user interface, which was rolled out a few years ago, is a popular software shell atop Windows Mobile whose widgets and menus make the phones easier to use. Unfortunately for HTC, there isn’t room for such software in Microsoft’s future. With its Windows Phone 7 platform due out before year-end, Microsoft is placing more hardware and software controls in place, which could leave custom interface designers like HTC out in the cold. By purchasing Palm, HTC would immediately vault itself to a Microsoft competitor.

Indeed, buying Palm would mean HTC would stand alone for the first time ever as a viable smartphone company, one with hardware expertise, prior relationships with nearly every carrier worldwide and a new software platform to call its very own. It makes perfect “sense” for HTC to make a play for Palm.

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Image courtesy of HTC

36 Comments

Baz

HTC does not need Palm. It does not need its debt, its troubled past of technology, marketing (dumping of Pre on resellers) and business faux pas(yet another OS Palm is trying to spin off – like that worked so well with PalmSource/ ACCESS), or the legions of frustrated Palm users, who used to be as devoted to Palm as Apple users are to their products.

Palm failed on its own – it hardly needs to take HTC down with it.

GoodThings2Life

I think that this is all about Intellectual Property and patents than anything else. This would effectively ward off all litigation attempts, and give them the flexibility to continue in whichever direction they want.

But I don’t think they would shoot themselves in the foot by discontinuing their production of Windows and Google phones. It’s how they’ve become popular in the first place, and I don’t think they’d ruin that. I’m entitled to be wrong, of course, but I don’t believe they would.

Peter Braun

What is the roadmap for Asian “partners”? First assembling components into finished products (design and components provided by others), then some design, now they do the whole system sans OS. Adding OS seems like the logical next step. If they feel ready for it. Though Lenovo seems like a better fit.
Android market will become crowded and low margin very soon.
Look at the PC market: Windows competition is based largely on price with little differentiation and margins. Compare to little (relatively) Mac market and its margins. PalmOS can deliver differentiation and control over one’s destiny.

Ray

“Indeed, buying Palm would mean HTC would stand alone for the first time ever as a viable smartphone company”

I think this one sentence sums it up; HTC would indeed stand alone. HTC has built a viable successful business building phones for others. It was pushed into the spotlight with TouchFlo, a replacement for the Windows Mobile UI that Microsoft allowed to languish. It was a successful move that lead directly to Sense on Android and then back on Windows Mobile. Good for HTC.

But a wholehearted move into a wholly-owned WebOS on HTC hardware would make HTC a competitor, not a partner. That, and the fact that HTC is an aggregator, building phones from parts supplied primarily from third-party vendors like Qualcomm, a model that can be duplicated by any company with sufficient resources, means that HTC would quickly lose the customers on which it depends: Google and Microsoft.

HTC standing alone would most likely mean that at least in the U.S., it would become the next Nokia, producing excellent smartphones that no carrier will touch.

Lawyer Up

Be advised that WebOS has Apple IP inside and it is no secret that all those ex-Apple employees took some of Steve’s IP with them and transferred it to Palm illegally. Apple has so far decided to ignore these infringements on its IP because they saw Palm as no threat to their business. However, if HTC where to acquire Palm all hell would break loose and Apple would be forced to unleash a rabid flurry of lawsuits (both criminal and civil) against HTC that would suck all their resources dry. HTC will have to answer this question:
“Do you really want to pay a visit to Injunction City at this time ? Well do ya punk ?”

Friend-o-Warning: Don’t make Steven P. Jobs angry.

GadgetMerc

That is a great point. It didn’t occur to me that Palm could bring them more legal issues. Palm could be Apples trojan horse.

Joe

You’re forgetting that Palm has patents on the smartphone in the first place (Integrated handheld computing and telephony system and services) among others.

Anyone who went after them in court would be opening up a huge can of worms.

Realty

HTC goes where they can make money. They backed away from Windows Mobile and took on Android because Android sells handsets. I do not see them competing with Android or desiring to upset Google in any way. Now if there really are patents that might help fight Apple, a purchase might make sense but in that case it would make sense for Google to buy Palm too.

Raul

There are 2 major playors in the mobile world who seriously need a good mobile OS, HTC is nowhere in the picture, software is a a reason for it to push hardware and partnering with Android and Windows gives it far more numbers than going it alone with its own OS.

RIM with its enterprise grade secure business OS definitely needs something for its consumer OS, a separate OS and brand will give RIM far more flexibility in going after the consumer market than its current efforts, and of course many many years after iPhone Nokia has yet to show any inspiration or create any excitement in the smart phone world.

A Palm buy would give both these companies serious press and traction in the market. Given their resources it would be worth it just for the press and re branding and creating excitement for their consumer phone initiatives.

BoardMem

HTC, like any company has pride. you have to see it from their angle, they have been doing the primary grunt work for a decade while HP (iPaq), Dell (Axim), Palm, Google, etc all receive the prestige & glory while nobody even knows who HTC are. whats even worse is that these are American companies. can you imagine the titillation of swooping in & buying an American company that is literally the godfather of the entire handheld industry?

nobody knows more than HTC that theyve been carrying this industry on their back, what would these American software makers do without them? depend on Motorola, Samsung? thats actually hysterical. HTC wants to be a major player, they are tired of being 2nd fiddle. they know if they pull their support & create their own platform they will leave their competitors crippled.

right or wrong, we live in a world were hardware still gets the initial praise not software. hardware is also more difficult & expensive to develop than software. software makers losing HTC is FAR worse than HTC losing them.

Joe

I’m firmly of the opinion that HTC would just gut the company for patents and key talent.

They already have partnerships with Microsoft and Google, and I don’t think they’d be willing to do anything to upset those by taking a risk on a (unfortunately) failing company.

Besides that, combining all the different aspects of SenseUI, Android Java apps, Palm’s Mojo apps, widgets, the cards metaphor, SDL libraries and applications, etc. would be a nightmare.

I’m betting that it’ll be an established company that wants to get a shortcut on their start in the smartphone sector. HP, Lenovo, and even the recent rumor I’ve read of Cisco would make a lot more sense than HTC, unless the plan is to gut the company.

Ryan

I think saying that it would thrust HTC into the spotlight, or “make them a contender” is just a bit off. They’ve been making top quality hardware for a while now and just a couple of phones for Palm as well. :)

HTC’s made some fantastic hardware, unless they’re annoyed that they can’t supply thier own UI for phones with WinMo7, I can’t see what they’ll gain from a Palm aquisition. Palm is dead… WebOS just made the corpse twich a little a scare the coroner, but the corpse isn’t going to stand up and start climbing the technology ladder to greatness.

IP/patent snag is the only thing I can see being worth it for Palm. Maybe palm has a super secret multitouch related patent that HTC can throw at apple. shrug

Jorell

Whatever brings WebOS success. I don’t own a Palm but just testing one for hours at a Sprint shop made me tear with joy. Amazing video clarity, the ideal multitasking experience, syncing of email, messaging, etc into a single thread, flash support, pinch to zoom, I just love the card system.
Combine that with a high powered HTC phone: Slim profile, powerful processor, super high resolution screen, 5mp+ camera… it sounds delightful!

GadgetMerc

I’ll be honest, I haven’t crunched the numbers. But I would think HTC would just be happy with the new IP and scrap the OS. I’m thinking the IP alone could save them millions if it helps them defeat Apple in a courtroom. I haven’t seen the for sale sign on Palm, but if they cant stay a float on their own it can’t be worth too much. Maybe a few hundred million.

HTC is doing great on Android. Why would they want to compete with something they have worked hard to perfect already. They have put a lot of effort into Android. It would just seem like a step back to me.

Jayant

Rather than HTC-Palm deal, a Motorola-Palm deal would be a better match. For HTC to jump on this type of business model seems like they will have to break from their existing relationships which is risky in the smartphone business. Just my 2 cents

Strat

Does Palm have intellectual propery that can be used against Apple?

NeoteriX

Well, it’s been a common theory for why Palm hasn’t yet been sued by Apple despite having multitouch and other similar UI features as the iPhone since day one of WebOS. ;)

gbp

kevin,
HTC making an offer for PALM makes sense. They need OS , and patents. OTOH what do you think of Sony ? Folks are forgetting Sony. The 50K plus iPhone gaming apps can be ported to WebOS with relative ease. Sony can use Palm for new phones/tablets.

Sanjay Maharaj

I am not sure if this will be the right move for HTC. Palm has been struggling for a long time and for HTC to go into the smartphone market and compete with the leaders, they will need to pour more dollars in what is already a money loosing venture. I can see HTC buying Palm for it’s patents and related technology but to compete in the now crowded smartphone market, is an uphill battle.

Michael Wolf

@Kevin – I’m not sure an Palm acquisition makes HTC a partner-non-grata with Google/Android. I think since HTC clearly is a good hardware partner and has already been laying it’s own software UI on top of devices it ships, it could easily push out devices w/its own OS. And, perhaps more importantly, if HTC owns all the Palm patents that Google would likely want to rely on in an Apple patent fight, Google may need an HTC/Palm partner.

Kevin C. Tofel

Very true, Mike. I was thinking along the lines of Google’s perspective. If you were them, would you want your primary handset maker offering it’s own handset with a competing platform? I wouldn’t, but that’s just me. Google may be flexible enough — and want some allies in the patent areas that you point out — to be OK with it. Long term though, I don’t see it.

Lewie

Granted HTC makes some decent hardware and have been an ODM for Palm in the past, the last thing I want to see on top of the beautiful webOS is SenseUI. SenseUI made sense for android and WinMo due to the lack of polish, but webOS is elegant and a joy to use.

Kevin C. Tofel

Lewie, I love what webOS offers as well, so I hear you. But there’s room for improvement in every product. Perhaps HTC simply tweaks the UI or addresses some remaining gaps instead simply throwing Sense on the device.

Who?

You can turn off Sense on both WinMo and Android phones. You’d be left with HTC’s hardware, which would still be worth it.

Dean Collins

lenovo buying pal, sure.

htc buyign palm? thats crazy talk, not going to happen in a million years.

your reasoning is whack.

NeoteriX

I would agree. The problem is that Palm is complete, stand-alone mobile products company. That makes them really only fit to “plug-in” to a company that hasn’t already invested/entered into this market.

As far as I can tell, Lenovo lacks a fully developed and mature mobile division (notwithstanding the few random Chinese phones). An acquisition by Lenovo would mean that Palm gets to remain relatively intact, and can benefit from Lenovo designers/engineering without disrupting things too much at either Lenovo or Palm.

HTC though — they’ve been at this game for years. Prior to Palm’s recent poor quarter results and recent announcement that it is seeking a buyer, it had to have had proper 2, 5, 10 year plans that mapped out its corporate strategy–plans that did not include Palm or WebOS. Plans that ostensibly included development paths for Android and Windows Mobile.

It seems it would be jarring to integrate the two companies, putting hardware and software developers that have previously spend the past several years perfecting Android development and giving them something brand new to work with. Either way, it seems like the time spent trying to integrate and deal with the acquisition of WebOS means that it will suffer in development and fall by the wayside. The alternative strategy seems unlikely too — maintaining Palm as an independent company in direct competition with its now parent.

Rod James

This would be a dream come true for WebOS lovers like me.
I have 160 employees and I would not think twice about getting a HTC like the EVO running WEBOS for all my 160 employees.

It is a match made in heaven!!

Rod

sfmitch

I keep hearing HTC mentioned as a possible buyer for Palm.

My take is that if HTC buys Palm it is ‘betting the company’ with a new go it alone strategy.

Buying Palm makes sense if 1) HTC just wants IP (patents, software, etc.) and talent or 2) HTC wants to make and sell HTC phones with their own OS (like RIM & Apple) and stop being a contract manufacturer – I don’t think HTC can really do both since competing with your clients usually doesn’t work out so well.

If HTC goes all-in and decides to go head-to-head with Apple, RIM, Nokia, Android, etc., it is by no means a sure thing that they will do well. Does HTC have the chops to negotiate with carries, do great marketing, strategic planning, etc.?

It sure would be interesting.

Yuvamani

Does HTC have the chops to negotiate with carries, do great marketing, strategic planning

HTC has a great relationship with a lot of carriers haveing oem’ed so many smart phones for them. Their ads which only debuted last year or so had a decent response and as for strategic planning… does that mean anything in the mobile space of today ?

Chico

Actually HTC would be considered a customer of microsoft and android is open source and samsung is developing it’s own OS too

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