Palm for Sale: Now It Gets Interesting

Bloomberg reports this morning that Palm is putting itself up for sale and seeking bids “as early as this week”:

The company is working with Goldman Sachs Group Inc. and Frank Quattrone’s Qatalyst Partners to find a buyer, said the people, who declined to be identified because a sale hasn’t been announced. Taiwan’s HTC Corp. and China’s Lenovo Group Ltd. have looked at the company and may make offers, said the people. 

The venerable company’s market capitalization is less than $1 billion though the company has almost $600 million in cash on hand. So I’m guessing a purchase price would be in the $2 to $4 billion range. Keeping the price down is the fact that the company’s real asset is WebOS, which itself isn’t worth billions. It’s sad in a way that the company that pioneered mobile computing is meeting this fate. Whether the Palm brand survives will depend on the particular buyer and its position in the market: a mobile OEM will kill the brand a PC hardware OEM will likely keep it.

As I mentioned this weekend, it’s been quite clear to us from almost the launch of the Pre that the company would ultimately be sold to a larger player. As suggested, the list of potential buyers includes all the major computer hardware OEMs (with Dell and Lenovo as lead candidates), Nokia and Microsoft as possibilities. Microsoft is less likely to bid today given Windows Mobile 7 and Nokia may feel with MeeGo (Intel + Maemo) that it doesn’t need a new (third) mobile OS to work with. In my view Nokia would be smart to grab Palm. 

Chief Executive Officer Jon Rubinstein has been quoted several times saying that the market has room for five smartphone players. That may be true on a global basis, but in the US it’s really more like three or four (maybe). Right now those three are Apple, RIM and Android.

A company with greater financial muscle could help propel WebOS into that list of successful smartphone contenders. HTC is really interesting to consider here; the company has been seeking to establish its own brand but remains overshadowed to some degree by Android. While it’s probably not going to be the ultimate buyer it would shake up the market and might impact Android, as the leading Android OEM. 

However if I had Nokia CEO Olli-Pekka Kallasvuo’s ear I’d say: dump Symbian, buy Palm and shift 2011 smartphones to WebOS.