HP and Palm: what happens next
By Nilay Patel 
posted April 29th 2010 2:05PM
posted April 29th 2010 2:05PM
But now that we've had a day to wrap our heads around the news and think about what Palm and HP said to us last night and to analysts on the conference call announcing the deal, we think we've got a pretty good set of educated guesses on how things might shake out over the next few months. Read on!
The deal
First things first: the deal isn't official yet. Palm and HP have to jump through a number of regulatory hurdles first, including look-sees by the SEC and FTC. That process isn't expected to be completed -- at the earliest -- until HP's third fiscal quarter, which ends in July. When's all said and done, though, HP will spend a cool 1.2 billion dollars in cash to buy all of Palm's outstanding stock at $5.70 a share. Palm will then become part of HP's Personal Systems Group, led by Jon Rubinstein, who expected to stay along with most of the rest of the senior team -- HP told us there were "aggressive" retention plans in place. What remains to be seen is how Palm's unique culture is absorbed into the massive behemoth of HP. Palm's relatively small and quirky, and although we're told Rubinstein is excited to lead Palm into this next phase, that may not be the case for its other engineers and employees. Palm's already lost some talent at the top in recent weeks, so we'll see if this bit of good news stems the tide or hastens the drain -- HP told us they're going to announce a new organization strategy as time goes on. And here's a fun throwaway question: as of right now, every Palm employee we've known from Jon Rubinstein on down is a Mac user. Are they all going to switch to Envy 15s now, or what? It's silly, but it's also a significant cultural difference the two companies will have to resolve.
Palm's current products
As it stands right now, Palm's current products -- the Pre / Pre Plus and the Pixi / Pixi Plus -- are unaffected by the deal, and Palm tells us that its hardware roadmap will remain unaffected in the near term. That means we should see the Pre Plus and Pixi Plus hit AT&T as planned, and whatever new hardware Palm has in the pipeline will also continue to be developed -- Jon Rubinstein told us that after a couple days of buyout excitement it'll be "back to work and full steam ahead."
It's the same story for webOS -- it should be unaffected in the near term, and things like the Ares SDK and developer evangelism should continue to go on as scheduled. Of course, it might be easier for Palm to lure devs to the platform now that HP's bank account is reassuringly behind it, but we're not hearing about any major substantive changes to the current product mix or near-term plans.
The Palm brand and future products
What Jon or HP wouldn't tell us is whether or not Palm's brand will remain -- whether or not future devices will have the Palm logo on them or just an HP logo, or whether the Palm name itself will continue to exist. That's a big question that clearly needs to be dealt with as the buyout talks wrap up and the deal gets finalized in the next new months; we're getting the loose impression that the Palm and webOS names will stick around in some way, but we were told a more definite answer won't be forthcoming until the deal closes.
We also don't really know how this deal will affect Palm's future products. HP already makes and sells the iPAQ line, which has its own proud history of past successes and recent failures, and that DNA is sure to filter into whatever products Palm / HP put out in the future. We also don't know how far into the future Palm's existing roadmap goes, and how and when those plans will be integrated with HP's plans for the mobile space -- sure, the Pre Plus will hit AT&T, but after that things are very much up in the air.HP's current products and product plans
HP doesn't really have much going on in the mobile space right now -- there's the iPAQ Glisten on AT&T and the iPAQ Data Messenger on Vodafone, and... that's about it. We'd expect those to die a quick, painless death, along with the Android-based Compaq Airlife netbook and any other Android plans HP's been brewing up in the labs. You can't "double down on webOS" while supporting another mobile operating system, right?
Well, maybe you can. HP is listed as a Windows Phone 7 launch partner, after all, and Palm certainly has a long history of making Windows Mobile devices. What's more, HP's execs were quick to say that Microsoft was a valuable partner on the conference call announcing the buyout yesterday, but it was unclear whether they were talking about Windows Phone 7 or Windows 7 for PCs -- we can't say we're expecting to see a Windows Phone 7 handset out of HP at this point, but it's not totally out of the question.
We also don't know what's going to happen with the HP Slate, which prominently featured on several slides during the conference call yesterday. We don't know if it was just there as a way of illustrating HP's recent moves in the mobile space or a hint at something more, but our guess is that it too will die a quiet death -- sure, it might still launch in June as expected, but pushing a desktop operating system like Windows 7 onto a full slate device has always been an idea fraught with peril, and webOS seems much more naturally suited to the task. What's more, we can't see HP throwing any more development dollars at the Intel-based Slate when it just spent 1.2 billion dollars on an ARM-based mobile OS. We'll have to wait and see, and that brings us to...
Tablets, netbooks, and connected devices
What we do know is that HP has always put effort into the touch-friendly MediaSmart and TouchSmart software layers to compensate for Windows' deficiencies with mixed results, and the acquisition of webOS and Palm's thick portfolio of touch and mobile patents will dramatically improve those products as the company blends things together on its huge selection of netbooks, tablet PCs, and slates. The future possibilities are endless: netbooks / netvertibles that dual boot webOS and Windows or even run webOS as a software layer, pure webOS tablets / smartbooks that get hours of battery life, webOS smartphones that dock into HP touch PCs and share their apps and settings -- hell, we'd even love to see HP take its touchscreen printer line to the next level with a healthy dose of webOS. Talk about the world's first web-connected printer.
Regardless of the hardware, HP has just jumped ahead years from its mobile TouchSmart offerings by acquiring Palm while dramatically lightening the load of compensating for Windows' skeletal touch support. We're just wondering how quickly and how aggressively the company will pursue the many opportunities it now has -- and whether it can remain focused on delivering an excellent user experience while doing so.
Marketing
Wrap-up
After decades of insane restructurings, name changes, and near-death experiences, Palm has once again ceased to be an independent company, and HP is now a major player in the mobile space, ready to spend the cash required to make its new in-house OS as competitive as possible across a huge range of devices. Just think about that for a second -- the new list of mobile heavyweights is Google, Apple, Microsoft, Nokia, RIM, and... HP. We can't say we expected that when we checked into work on Monday.
We've barely scratched the surface here -- we're sure to feel the ripple effects of this buyout for years to come. We'd be lying if we told you we could predict with any certainty how that will play out over the next five years, or even necessarily the next five months, but we are certain of one thing: if you thought the mobile market was already bonkers, you ain't seen nothing yet.
[Thanks to Peter. P, Ousmane Mariko, and cynomyso for some of these great images!]
Well, hopefully this means Palm will have more money and be more aggressive with the carriers (start by selling the UMTS Pre unlocked) and release their new hardware quick. I just hope HP won't put their hands too deep.
Palm calculators!
I completely disaggree with HP's advertising. Their printer ads were pretty good and they used a nice well known indie band (Vampire weekend) for their HPO touchsmart commercials. Also the way they have been marketing the HP Slate so far I think is pretty cool because the ads make it look great even though it most likely won't be. So I disagree... There have been other pretty good ads by HTC so I think that Palm will get better ads when mixed with HP.
BTW nice write up Nilay, love that you guys still put effort into these more opinion oriented posts!
I'd love to see a thorough blog post discussing why google didn't buy Palm or at least a discussion of the competitive effects of this buyout on Apple, MS, Goog, RIM, HTC etc.
Google is fighting patent issues on 2 fronts with Android. Android hardware partners are needing to pay royalties to MS and being sued by Apple. The obvious patent protection seems to be something that would have had a lot of value to Google. They love taking over companies with good executives/engineers and Palm is one of the best. Incorporating WebOS features into Android would have been a boon. Finally, by not buying Palm, Google just created a competitor out of a partner. As the article stated, Android development for HP will most likely cease VERY quickly. With the hardware distribution that HP has, having them use Android in their tablet/slate/netbook/smartbooks would have given the platform plenty of momentum in that space and helped Google achieve critical mass.
@caneaddict
Also considering the benefits and Google's buying spree, $1.2B would be small change to them if it turns out to have any real impact on the Apple/Goog/MSFT war. Goog has $26.5B in cash, $1.2B is a rounding error for them.
@caneaddict
Google buying Palm is madness, how would they even begin to integrate a failed mobile device company into a successful open source mobile OS team ?
These purchases have to be explained and approved by shareholders and buying Palm just to flush it and stop a competitor from buying it is bad business, especially considering Google's only competitor is Bing and Yahoo, they don't face down HP in any market.
They would piss off a lot of partners by getting into manufacturing and since HP has released nothing running Android they had no reason to stop that deal going through.
HP and Dell have been desperate for an alternative to Windows for many years, they both even tried to license OS X.
Mobile is the future of consumer computing and HP is making sure they have their own platform for a change.
@caneaddict
I agree... some inside info on the companies that didn't buy Palm.
Good work everyone else... the largest (second?) PC manufacturer just bought the best mobile OS (yes I said it, it is the best)... wow that's not going to work out well for you!
Just got back from the future April 29 2011... I mean 2021:
uww.Engadget3D.awesome Blog Holograph sends:
"Remember that company where the guy used to wear mock turtlenecks? Dave Jods was it? At Peach computer. Well HP-Compaq-Palm-Intel just came out with an emulator to play all your old ePhone apps (remember when we used to call them apps?). Google-Blackberry has had an ePhone emulator for a while, but the new HP Palm 5000 with that capacitive holoscreen should emulate those ePhone games in four dimensions!"
It isn't hard to figure out what happens next. Just look at what happened when HP acquired Compaq, EDS, 3Com and others. They will devour them into the HP brand aggressively cutting any overlap in the business. Of course that's why much of the "talent at the top" of Palm is already gone. They knew the deal was going down and they got out of the way by being given stock options that would cash out at the $5.70 per share.
I'm confident that the Palm "name brand" will slowly disappear as the other brands pulled into HP do. It will take years for that to happen anyway and they will just get renamed "Palm: an HP Company" in the meantime.
WebOS gives HP a mobile operating system capable of competing in the market right now and it gives them growth in some important categories. You will see a touchscreen WebOS printer. You will see a WebOS slate. HP wants to be the "one-stop-shop" for technology in both the business and consumer worlds. They are going to use Palm and WebOS to that end and everything else is fat that will be aggressively trimmed.
@Batmantis HP has been Microsoft's go-to partner for "futuristic" or trial-balloon hardware for over a decade, and will continue to be. Anything new Microsoft tries to do, such as a slate, you can bet HP will be front & center on announcement day with matching hardware. HP will not cease to ship Microsoft products just because they also ship competing WebOS products (if they do). HP has nearly zero in-house software development expertise in the consumer segment and relies on Microsoft to be "creative." It'll be surprising if HP doesn't license Palm's patents to Microsoft in exchange for strong Windows Phone 7 support. Maybe they'll ship both smartphone OSes by next year, but will secretly be hoping Microsoft wins, so they can get back to business as usual.
@Matt B
I certainly never meant to imply that HP would wholesale replace Microsoft with their new WebOS toy. Microsoft is still an industry leader and will be for the foreseeable future in the PC/Desktop space. But you had better believe that HP is taking Palm to replace Windows in the mobile space (a market where Windows is far from established anyway.) With all the deals that the HP services division does they will be leveraging Palm mobile products harder and at more competitive prices than a comparable Windows device. I don't think WinMo7 is going to target or appeal to the business world anyway so of course WebOS is the direction that HP will take and build on.
Again, their entire company philosophy over the past few years has been to become the One Stop Tech Shop for both consumer and business customers. That's why they became #1 in PC and Printers while at the same time spending billions to get major footprints in networking (3Com) and services (EDS) to be a leader in the "Enterprise" world competing with IMB and the like.
The writing is on the wall for how this is going to be played by HP.
Also, keep in mind that as the #1 in PC and a major player in practically every other computing market HP isn't exactly a slave to Microsoft. Microsoft needs to keep their software on those products (and with those business clients) just as badly.
Only Engadget (and other "tech" blogs) seems to be surprised by this, if you look through the comments on the original "Palm is up for sale" story you will notice a few comments (my own included) pointing out that HP was a perfect fit for Palm.
Seems to be a real lack of any actual journalism with all these stories, doesn't anyone think the timing of the announcement was very close to HTC licensing MS patents, they must have got wind of it and found MS willing to help them out of their legal fight with Apple.
HPalm?
I think HP will develop some badass phones. Look at the new dell ones coming out. I'm sure HP could develop similar most likely running webos/wp7.
I really don't care for slates, but I'd like to try out a webos netbook. My vista netbook runs pretty well but I'm sure with a more capable OS it would run even faster.
This actually makes me really happy. The perpetuation of WebOS is something people should support. This is seriously awesome.
1) iPAQ and HPs entire phone division dies and is replaced by Palm (which keeps its name) since it was a complete joke to begin with.
2) WebOS is fleshed out and used on some of HPs new tablets and smartbooks, instead of Android, Moblin, or some other non Windows or Linux based operating system.
3) HP uses its strength to better market and better sell its line of Palm and WebOS products, getting them onto most major carriers with little delay, selling them unlocked or on contract through the HP Store, and creating ad campaigns designed to basically shit on Android and the iPhone.
I'm not even a Palm fan. Hell, I'm probably buying the My Touch Slide when it comes out on T-Mobile, but Palm is the underdog (who I usually root for), and they have a real chance to make moves with HP behind them. Props to them.
Palm's name/brand will disappear soon after the purchase just like 3Com, Compaq and all the other companies that HP has absorbed. Not sure why people would think otherwise...
HP will now be Hairy Palm.
It certainly is a big move and one, I am pretty sure, that noone expected.
As for advertising, remember that HP does have good advertising. They were able to revitalise their brand almost overnight with it. Late, sure, the agency guys are probably all iHappy with their Apple gear (I'm guessing). There *has* to be some conflict of interest there somewhere.
From a branding perspective, HP is pretty solid. We'll see. If they start pumping out weird ads, personally I'm going to go with my gut instinct and think they are being subconsciously sabotaged by the agency folks (who are pretty much Apple nut-huggers).
I'm pretty excited about a potential webOS tablet...until MS killed my enthusiam with announcements of no courier. Bastards!
I wonder if HP will take all of their Macs and throw them in the grinder :))))
This is a good deal, Palm to HP is gold. They paid 1.2b and they can make 5X that much in one year.
I think the Palm name will stay. They kept the Compaq and Voodoo names after they bought them. Sure they didn't keep the 3Com name but besides when Palm was part of them they really didn't make any consumer devices. They made routers and switches which weren't major commercial devices so absorbing them into the HP name wasn't that big of a deal. Palm still has a name and a following so I think it'll stick.
The thing I'm wondering is how this will effect their current roadmap. I know it won't change it but will HP "tweak" it to make it better? Think if HP bought Palm before the Pre came out, they would have been able to get rid of the hardware problems it initially had and maybe make it more like the Pre Plus is now or even better.
If HP is a partner for Windows Phone 7 then maybe their iPaq's (of course with the HP name) will be Windows Phone 7 and they'll have other names for WebOS products (With the Palm name).
I was reading an article a week or so again about Palm and someone made a comment that basically said "It would be interesting if whoever buys Palm would use Android but a skin that gives it the functionality of WebOS." I thought that was interesting because if this could be done you'd have all the loved functionality of WebOS (the card system, synergy, the great calender...etc) but you'd have the 40,000+ apps in the Android app catalog. I don't think HP will do this, but if they did think about it. They can even do it with Windows phone 6.5 (not 7 because you can't skin 7) if they wanted.
I'm really excited to see what HP brings to the table with Palm. New phones, tablets, dream screens...who knows what else. Hopefully this will put a fire under the app community and we'll see a flood of new apps com.
I can't buy a phone (subsidized by Sprint) until late August. A new phone may not come out before then (maybe a phone from Palms roadmap will). I'm wondering if some screenshots or something of a new phone will come out that will make me want to keep my present phone a little longer so I can get a new Palm phone.
As a user of their products, I wish the best of lack to Palm (and the webOS) although I'm afraid that they will meet the same fate that Voodoo Computers and the "Voodoo DNA" met after been acquired by HP. A couple of token products that were probably already in the pipeline and for which HP will make some initial noise but ultimately let fade away at best or discontinue soon after at worst (remember Blackbird02 -that was downgraded to the Firebird and then discontinued- and Envy?).
I HATE that IPAQ picture such a turn off. Please use something else..PLEASE!
At Nilay:
"We'll sell it to chicks!"
LOL!!!!!!!!
My neighbor loves her new Iphone except for the minor problem that it can't make calls and the 3g data doesn't work... great for listening to tunes though...
@obobo Great buy an iphone that makes a great ipod touch but a crappy phone. Good product.
*Face palm*
Well..... I'm slowly warming to the idea of Palm and HP. Like many have stated however, the current Palm Fan base, of which I am one, will be reading the tea leaves quite astutely.
I still have a fear in the back of my mind that HP will be like a fat rich spoiled ADHD kid on his birthday getting the thing he wanted but not sure why and beating it against the fireplace until it's broken and looks nothing like what it was when he got it, will get bored and move on to the next gift he's not sure what to do with.
However, keeping Jon R. and the senior staff on tap and saying they will allow Palm to operate as a separate business unit does show that they are as interested in the direction WebOS is heading and not just the asset. They have to make sure they don't try too hard to cut WebOS up and beat it around to make it fit into the HP mold, otherwise they will find themselves back where they started with more non working HP material instead of the promising Palm material which is WebOS and the Homebrew community.
I am also intrigued by the Tablet possibilities. For one, the name will sound a heck of allot better than ipad (ridiculous). If they use their laptop manufacturing facilities to make a touch screen / laptop home PC replacement runner, like Lenovo's U1, then they have a piece of kit that allows people to easily realize the value of the product. That Laptop / tablet running WebOS would be brilliance. To digress..... the possibilities are there if actions are slowly carefully planned and thought out. Medicate the child a little and the new toy will survive and he will enjoy it much more.
Thanks Nilay for giving us an analysis of possibilities HP + Palm life together, and indeed this life could be a dream life fulfilled with realistic achievements. And indeed, it appears that while majority of the media's attention was with other bidders for acquiring Palm, Inc., HP came stealth and snatched Palm away.But I doubt it. It could be like that from the past when Palm made the quick move to acquire Handspring by just taking a look at the Treo smartphone and bringing back Hawkins, Dubinsky and Colligan home. And I think Todd Bradley was the CEO of Palm, and I could be wrong in the timing, but anyway, coming to now, while negotiating with HP, Jon Rubinstein perfectly felt that perhaps HP could be that perfect partner and home for Palm given that Mr. Bradley's total familiarity with Palm's culture from not-so-distant past, and did not hesitate to show Todd Bradley what Palm has up in its sleeve, either in hardware product lineup, or in the never-yet-disclosed capabilities of webOS which could be immediately implemented on HP's hardware form factors making them killer products in the market. And that was enough to floor Todd Bradley to run to HP's BOD and get their blessing and comeback fast and stealth with guess what, ONE BILLION DOLLAR CASH, wow!! And then an additional $400 to take care of all loose ends. No kidding, and no outsider knew anything, and almost everyone was watching Palm for either being taken under, or its not so slow disintegration to bankruptcy (but a lot of people like me did not wish that to happen in reality). And then just like BOOM ! came HP with the news of taken over , or more like save the partner that with secrets no one knows other than the savior HP, paying over 23% premium over Palm's stock price at the close of the market on April 28, 2010. What a change that news created in the following after hours. The news created a full blown panic among the shorts on Palm stocks. In the following after-hour market trading and in the following morning's pre-market trading , the total shares traded believe it or not, was 99,431,610 !! So this big volume traded before the regular trading started on April 29, 2010. Anyhow, just ignore my wild imagination of Palm's secret, and think HP's move was a perfect normal move by a normal purchaser given Palm's situation of not being able to generate any significant demand of its two perfectly and very attractive looking (at least in my taste) smartphones running on that amazing webOS which it looks like now a must-have thing for HP ! Strange indeed. So now me like the rest of the world is going to wait and watch what is the next great thing that can come out of this union of HP and Palm.
So Nilay thanks for giving people like me some food for thought. And it is kind of ironic that in this afternoon Verizon Fed-Ex-ed me my totally free upgrade of my choice, a Palm Pre Plus.. But I feel very happy getting it. So my palm experience is :
M500 pda to Treo 650 to Pre-Plus now..
HP Palm should have the ability to build itself as a top contender in the mobile space if they can deliver the goods within 6 months i.e. before year-end and thus keeping this momentum. The best mergers and acquisitions are made successful in the first 100 days. It is an extreme challenge as is putting 1.2B$ on the table. Let's see the execution. Just do it!
As I boop-bloop my way through my Tivo menus, I can't help dreaming of a WebOS Media Center.
The FCC hurdle should be no problem and we all know the SEC people just look at porn. Although I am firmly in the Android camp I am pleased that this deal is happening as Palm is a innovative company and it would have been a shame to see them fade away.
I feel sorry for many palm employees. When HP acquired EDS they in turn laid off numerous people. Many of the ones not laid off had the joy of getting their salaries cut upwards of 40%.
Good luck legacy Palm employees
Palm will probably become a brand of HP, just as Compaq did.
The card interface from WebOS will be integrated into the TouchSmart interface.
With HP's money and Palm's designers, they'll make a couple of phones with a WebOS-TouchSmart hybrid interface (a cheaper full-touch for teens, an expensive and more powerful full touch one for young adults / enthusiasts and a QWERTY+touch one for business users). These phones will probably be released in the holiday season.
They'll also make a tablet with the same interface which will bring us stuff what are expected only in the 2nd gen iPad (USB ports+host mode, camera, better resolution, video output, SIM card slot instead of microSIM, removable storage, pressure sensitive stylus, etc...) and release it too in the holiday season.
What happens after this... well, that depends on whether they screw those up.
@Gerusz you've got a crucial point here bruf..
HP should keep both brands: iPAQ = Windows Phones. Palm = WebOS smartphones. As for tablets, I don't care about them or how they are called.
I love everything about webOS, and I think it would've been cool to see it on a 4.3" slate phone from HTC, but I think HP has the same ideas in mind and they've needed a spark in the mobile area for a long time. I remember when ipaq's were the best business phones around, and I'm not that old, so this industry certainly has the potential to change radically here. Windows Phone 7 seems to be aiming for business as well with that new mobile Office it's demoed. Office on webOS anyone?
On of the things I find surprising is that people picked HTC, RIM and other smartphone makers as potential buyers. Even more surprising to me is that people seem to thing HP wouldn't be a good fit because they lack a good mobile option. If you think about it, why would the other smartphone companies want to buy up another smartphone company(other then to kill it)? HP doesn't have a thriving phone business. As is the case more often then not, HP bought a company that filled a gap in their products. The mobile sector is getting huge right and HP is wanting to step into it with a more established brand. The iPac man things are going nowhere for them and I think they saw that and figured out that buying Palm was a smarter move. which it is. Especially considering all those other PC companies like Dell, and Toshiba coming into the mobile sector.
Seems like some people are transferring their hopes regarding the Slate (and to a lesser extent the Courier) to this new HP/Palm marriage. To which I say: Don't get your hopes up.
Do any of you commenters realize how old HP is? 70 years!!!! While it has changed a little from its IBM-style button down culture, rest assured that they are focused exclusively on the bottom line. Palm OTOH was run like a startup. The two don't mix well, and anyone who has gone through a major merger like this knows exactly how awkward it is. Maybe HP will allow Palm to run independently for awhile, but not too long while it continues to bleed cash. Here are some immediate problems to deal with:
1. Huge inventory of unsold Pre and Pixi phones. Will HP write those down? Stop production while they wait for the 2nd gen WebOS phone?
2. How far along is the next phone in development? Did the money situation cause some paralysis in Palm? How quickly will that new phone come out? At least over the next year, it's a phone that will have to carry the load, not a tablet.
3. How much resources will go towards a tablet? Combined with the sure loss of engineers due to the acquisition, how hamstrung will a tablet team be?
4. Desktop client? HP does this pretty well, while Palm has stubbornly refused to have one. If HP wants vertical integration, this is a necessity. Who will work on it, how long will it take to appear, and which devices will it support? Will it be bloated like much of HP's current printer software or iTunes?
Maybe it'll all work out in thie end and the merger becomes a huge success. The odds are against it, and anyone who thinks this is just about simply releasing some new products is ignoring some serious issues that the new company faces.
The Slate a WebOS tablet...brillant...bye bye Win 7
No more creepy ads?
So let me get this straight....Palm, a company that is slowly but surely dying because of its lack to compete with Apple and Androids superior quality and ingenuity is being purchased by HP, a company thats have never really done well at all in the mobile phone / pda industry are teaming up??? Sounds like a disaster! Looks like they will both just continue down hill (together holding hands now though).
So maybe Palm can convince HP that netbooks are not such a good idea. And HP can make some revolutionary new form factor, like.. a horizontal slide out QWERTY. Or an ugly squary, silvery mini-tablet!
ummm no