Editorial: HTC and Palm should get hitched and make beautiful babies

By Chris Ziegler

posted April 9th 2010 7:35PM

Editorial

It's no secret that Palm's Hail Mary of 2009 -- webOS and the launch of the Pre -- hasn't been the rousing success that the company so desperately needed. Profitability is a distant dream, Verizon isn't giving the Pre Plus and Pixi Plus the marketing support they need to rise to the top, some analysts suggest that the cash in the bank is only enough to last for another year or so, and the choice of Sprint as a long-term exclusive launch partner continues to be a pesky monkey on the back. All of these realities have led Palm to become a near-constant source of takeover speculation in recent months. Name a company -- any company -- and odds are they've been caught up in a rumor at one point or another: Nokia, Dell, RIM, Microsoft, Google, Nintendo (yes, Nintendo), the list goes on. Of course, not all of these deals would make much strategic sense, and only one -- if any -- will ultimately happen.

For its part, Palm boss Jon Rubinstein is as adamant as ever that the company intends to remain independent and swing to profitability, and as best as we can tell, he's still got financier Elevation Partners' support in that quest. But let's suspend reality for a moment and assume an acquisition does happen; who'd be the best fit? We like HTC -- we like HTC a lot, in fact. Let's take a look at why.

It could be positioned, for PR purposes if nothing else, as a merger of equals. Palm's a proud company -- particularly with Rubinstein at the helm -- and in a way, it has every right to be. Palm's name is closely associated with the very early days of the modern handheld, they figure prominently into the success of the smartphone, and founder Jeff Hawkins is a living legend in the field of personal computing. HTC's big enough to swallow Palm whole, but small enough so that an acquisition wouldn't clearly be an acquisition the same way it'd be if, say, Nokia were to do the deed.
They've got a history together. Though they aren't currently working together in any capacity (as far as we know), HTC has made Palm's hardware in the past -- a lot of it -- most recently partnering on the Treo Pro. Remember, this was back in the days when Palm devices weren't flimsy pieces of garbage. The bottom line is that they're familiar with one another and how they operate; it'd be a comfortable mesh.
Windows Mobile is dead, and Windows Phone 7 doesn't give HTC a lot of flexibility. The HD2 becomes a tough sell simply because it's running an ancient, outmatched operating system, and that's a tragedy that HTC has only limited control over by investing boatloads of time, money, and resources into thoroughly reskinning it. With Windows Phone 7, HTC won't even have that option, making differentiation much more difficult than it is today -- and considering the devoted following Sense has earned, that's an issue not to be overlooked.
Android's still looking rudderless. We've written about the rumors that Froyo will start to undo the fragmentation tailspin Android has been in since the release of Donut, but until that happens -- assuming it does happen -- HTC gets hurt for being unable to keep up with Google's development pace. Virtually all Sense-powered Android devices in the field today are running Cupcake, which looks a little silly on paper when you realize that Google has released three major revisions of Android's core since then. It's not really HTC's fault, but they're the ones that take the hit at the cash register.
HTC needs a platform to call its own, and Palm needs hardware that doesn't suck. HTC has developed a reputation for making some of the best -- if not the best -- mobile hardware around; one need look no further than the stunningly beautiful HD2 to see material evidence of that. The big problem is that it's constantly at the mercy of its platform partners, as we've seen in the last two points. Put simply, HTC would be able to take its hardware / software integration message to the next level by owning both sides of the equation.
At this point, HTC's got tighter relationships with carriers. Gone are the days when you'd find a Treo on every carrier known to mankind -- and really, that's a big part of Palm's problem right now. By contrast, we dare you to find a major carrier anywhere in the world that doesn't carry at least one HTC device in its lineup.
HTC can iterate faster than Palm can. Consider this: HTC announced the Touch Diamond on May 6, 2008 and the Touch Diamond2 on February 16, 2009, two very different devices. It was easy for a consumer to see and understand how the Diamond2 was a worthy successor to the Diamond. Palm, on the other hand, has milked essentially the same ID and internals since January 8, 2009.
Patents, baby. Patents. All this other stuff is nice -- yes, HTC and Palm would make a ravishing couple, and we'd sure the marriage of HTC's hardware with Palm's software would blow up the universe in an explosion of awesome -- but whatever, HTC would do just as well do buy Palm, fire everyone, and throw webOS out with the trash, because it would still be getting Palm's enormous patent portfolio. You know, the patent portfolio that seems to have kept Apple at bay for over a year now? Yeah, that one. We still think Google will eventually become involved in the HTC / Apple lawsuit -- we're sure of it, in fact -- but there's no reason for HTC to be caught in the middle of some lame bloodless proxy fight between Steve and Eric when it can just go out and arm itself up independently. Yeah, we all want an HTC-built HD2 running Palm OS on LTE, and we're sure Palm and HTC can make it happen, but we'd bet HTC would be just as happy with a fun new product called "We dare you to sue us."

Of course, it just so happens that HTC is the most recent Palm suitor to be rumored this week -- and it seems like investors feel the same way we do, since they've led a 13 percent surge in its stock price on Friday alone. The first thing they teach you in the Apple School of Business is that what you say can be very, very different from what you mean -- and with Rubinstein's Cupertino roots, it's entirely possible that negotiations for a deal are already underway.

Either that, or they aren't.

Additional reporting by Nilay Patel

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