Rumors are swirling that Lenovo is interested in Palm.
Sure, it's mostly the talk of Wall Street hedge fund folks, but it's sent Palm's stock up 20 percent, or 77 cents to close at $4.62 Wednesday. Is Lenovo actually interested in acquiring Palm's sagging smartphone business? Perhaps. But there are several other companies that could benefit even more from buying instead of building a smartphone business from scratch.
Palm is ripe for a buyout because, well, the company is running out of options. As my colleague Tom Krazit pointed out recently, it might be time for the company to throw in the towel. Their chances for a turnaround are getting slimmer as their heavy investment in WebOS and the Palm Pre and Pixi haven't produced the desired effect. Palm sold just 408,000 phones last quarter. By comparison, Apple sold 8.7 million iPhones during the same time period.
So who should rescue or absorb Palm? Probably a PC company. Besides the fact that more cell phones are sold annually than computers, in developing countries over the next few years the first computers people will own will be a mobile phone. So it makes sense that companies that make PCs would want to get in on the action. Plus, the smartphone and the computer are merging, and as Apple has demonstrated, being at the nexus of the two is smart business.
Here's a look at who could be interested in Palm and why it makes sense for them to be, or not.
Lenovo knows a thing or two about buying a company's intellectual property and brand name and running with it. The Chinese PC maker bought IBM's ThinkPad business and has continued to churn out really good laptops. But the primary use of ThinkPads is for business. And while, yes, Lenovo has ventured into consumer PCs with its IdeaPad line and embraced Netbooks, it still does most of its business with other companies, not individual consumers.
Palm is a consumer brand and a reputable one in the U.S. when it comes to innovation in mobile computing, but its reach doesn't extend very far overseas. Lenovo, on the other hand, while well known here, is even bigger in China. So buying Palm wouldn't get them anything in terms of brand recognition for the people they do the most business with.
Acer seems least likely to grab Palm if only because it already bought a smartphone maker in 2008, E-Ten. Starting in 2009, the company began releasing a barrage of smartphones, mostly in international markets where the company already has had success with its laptops. They still haven't made any available to U.S. carriers, however.
Earlier this year it also released its first Android phone. If Acer finds success with Android, a free operating system, it would seem unlikely it would want to pay for Palm and its WebOS software.
Dell already has a smartphone business. At the end of last year, the company introduced its Mini 3 smartphone, but it's currently focused mostly on international markets, so far China and Brazil. Last month Dell (kind of) showed off the Aero, which will run Android and be available through AT&T in the U.S.
Dell seems like a likely candidate to buy Palm because it can (the company has $11.88 billion cash on hand) and because Michael Dell has said the company sees more acquisitions on the horizon in order to grow its business. Picking up a company like Palm means they don't have to invest in building their own OS--Web OS is already built--and the brand does have cachet. Dell's consumer business unit likes to challenge Apple on design and has been paying more attention to trends. In that way, Palm could be pretty appealing.
While Dell might be interested in Palm, the company who should be is Hewlett-Packard. CEO Mark Hurd has HP running smoothly and it has plenty of cash to throw around ($13.5 billion, to be exact). That the largest computer maker in the world doesn't have a solid consumer mobile phone strategy right now is odd. Sure, they have the iPaq line, but it's limited and mostly aimed at business users--they can sell them as part of an overall enterprise package including servers, workstations, and laptops. The iPaq Glisten has been fairly well reviewed, but it's a pretty basic messaging phone and isn't going to help them compete with the iPhone or the crush of Android phones that keep coming out.
Would Nintendo buy Palm? Probably not. But it's fun to think about. Their flagship mobile product, the DSi, does all sorts of things beyond gaming. And sure, Nintendo hasn't exactly sounded like its eager to make an all-in-one device like the iPhone, but as it's been pointed out for several years, sophisticated smartphones like the iPhone and gaming-centric devices like the DS are at least on a collision course. WebOS on the DSi? It's only a little big crazier of an idea than, say, putting a 3D screen on it.