HP beats out 4 other companies in order to buy Palm | webOS Nation
 
 

HP beats out 4 other companies in order to buy Palm 49

by The Keith Newman Sun, 16 May 2010 5:53 pm EDT

It may have seemed like all of the potential suitors for a Palm buyout were longshots before HP and Palm announced their deal.  However, in order for the HP / Palm buyout to be completed, the companies in question need to file with the SEC a detailed report of all negotiations that went down behind closed doors.  This is where we find out that a bidding war went down for HP to come out on top; oh and it wasn't all rainbows and butterflies with this merger deal either.  A timeline of the juicy details after the break.

February 17: Seeing the writing on the wall, Palm puts together a committee headed by Jon Rubinstein to figure out all possible options.  This could have been anything from letting other companies put webOS on their products (ala Android) to a complete buyout.

February 25 - April 1 - Palm had spoken to 16 different companies with only 5 of them actually making bids.  HP was the only company named but the four others are identified as A, B, C, and D.  Palm liked what HP, A, and B were all about, while C and D were simply after Palm for their IP portfolio.

Early March:  The decidedly best option for Palm was for them to sell off the company instead of licensing.  Reasons cited were dilution of the Palm IP and company value.  Which is odd because we reported that Ruby really felt that licensing was a valid option at that point.

April 13 - HP low-balls Palm for $4.75 a share (roughly 1 billion dollars for Palm) and 30 days exclusivity for negotating.

April 15 - Company A offers $600 million cash and Company B offers stock-for-stock options.  At this point, Palm then responds to HP by declining the exclusivity deal unless their offer improves.  HP says no thanks and doesn't offer anymore.  Palm also tells A and B that their offers aren't good enough to stockholders and they needed more, both of them exit from the bidding.

April 18 - Company C offers between $6 - $7 a share and a completed transaction within 2 weeks.

April 19 - Palm sends both HP and C draft merger agreements.

April 20-21 - Palm and HP enter into upper management meetings resulting in HP offering $5 a share.  Also, Company C drops their offer to $5.50 and sends Palm a revised merger document that pretty much makes the deal look less promising including a $60 million dollar penalty if the deal falls apart.

April 23-25 - Palm and Company C are involved in heavy negotiations to smooth over the latest merger.  (Meanwhile) In the middle of Palm and Company C duking it out, Rubinstein gives HP corporate a call and says "We are really making progress with C" (creative licensing here on my part) and that HP needs to "significantly and immediately" improve their offer to Palm.  HP responds with a $5.70 bid; Ruby takes that offer back to Company C who says it wasn't going higher on their bid but would like to buy IP from Palm as well as a nonexclusive license to webOS for $800 million.  

April 25 - The board considers and denies Company C's offer.

April 24-28 - Palm and HP work out an agreement; by April 28th the merger details were approved by Goldman Sachs, Palm's outside accounting team.  This agreement was announced and detailed the same day during a conference call we live blogged on.

So in the end, the news here seems to be that while analysts and pundits were nearly universally talking about how Palm was doomed, behind the scenes five different companies saw enough value in Palm to negotiate a potential buyout.

[Palm SEC filing via Engadget]

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49 Comments

Awesome to hear the story. Glad HP bought them.

Of all the conjecture below, nobody mentions Huawei?

VERY good and interesting article.

Almost feel like I was there. :)

So.... what is behind door number "C"?

Now we are just left wondering.....who was C? Guess we will never know huh?

Well, C never filed an NDA agreement apparently in the SEC filing, so eventually we could find out.

I wanna know what happened to Company D really. What was their bid and when did they drop?

so if C was only after their IP then that pretty much means to me it was htc, company B was lenovo or cisco.... Yea or naw?

I'm just glad that the "time of uncertainty" is over. That had me at the edge of my seat -- after all, I'm stuck with this phone for the next 100 weeks or so.

company:
A- Apple
B- Blackberry (RIM)
C- Cisco
D- Dell

just kidding

I think htc was c, then again it had to be a big company that had lots of money to buy palm.

I agree on HTC as C, but I'd pop in Apple as option D, Apple HAD to at least consider putting in an offer and Option D is reported as being interested only in the IP. You can bet your backside Apple would LOVE to get their hands on palm's IP, it would make them a patent juggernaut.

So If I understand this correctly, Company C was "initially" interested in only Palms patents.
So if I understand this correctly, they would've bought Palm to get it's patents and then what with the company?
So if I understand this correctly, Jon Rubenstien continued negotiating with Company C?

Odd, maybe I don't understand all the complicated stuff with big business but that sounds like it would been death bells for Palm and WebOS and they were OK with it. I mean he didn't tell them to go stuff themselves.

I'm going to assume Company A was HTC and Company D was Apple.
It would be nice to acquired Palm's patents. And I wouldn't put it past Jon to negotiate with them after reading this and the Engadget article.

-edit: looks like somebody else had the same exact thought while I was typing.

At the very least, negotiating with Company C gave Palm leverage in their negotiations with HP. You may also be forgetting that Palm's first responsibility is to their investors, if Company C ended up being the best offer, then they may very well have gone with it, regardless of the fate of WebOS or the Palm brand. Never forget that to corporations, customers really are nothing more than sources of income.

Great item Keith, thanks. Now let's all hope that Palm is working hard on the next gen phone and HP is moving the Slate along at a furious pace.

I hope HP has enough strength to stay away from exclusive deals with the carriers and releases GSM, CDMA, LTE, and WiMAX devices at the same time. Beceem's new combo LTE/WiMax chip could help here.

Weird, eh?
Cool read. Hope to find out the companies involved.

Me too if for no other reason beside my fascination.

Engagdet mentioned Group C not signing NDA for their part...so maybe they will known sooner then later.

Interesting though and thanks for the info. Sorli...

very good article, and insightful. Good to know what the company i'm using is doing, or how they got there.

I'd still like to see them sell the WebOS license to other companies. the universality of android makes it extremely competitive. Palm really needs some new hardware options. HP faces the same challenge that palm did- scale. even a 100,000 new apps is not going to drive that scale, hardware and marketing are desperately needed. the competition is closing in on palm unique features fast (or already have). lets get two or three companies working on alternative hardware...the marketing will then take care of itself from there as webOS would be ubiquitous.

The wide range of devices is also a HUGE problem for Android. Alot of Android users are left sitting around for months after other phones get updates. The OS is hugely fractured. As much as you can say that Apple's approach to the iPhone is borderline fascist, it's not fractured, users aren't stuck waiting for updates while other devices surge ahead. Once you get beyond 3, maybe 4 devices, it's far more of a hindrance than an advantage.

I agree. Remember the last WebOS update took so long for all of the carriers to "approve" it. And then some of the models had an issue with it. At some point, the non-pluses will be stuck without a WebOS update (like Apple 2G and 3G with the new iphone OS.) With a few phones like Apple, you get a better user experience. That goes for their computers since day one. Sure, you don't get the numbers, but you get the fans. How many non-geek people were fans of MS-DOS or Windows. Google is the new Microsoft.

...and Apple is the new IBM.

YES!!!!!! That's awesome I mentioned that in another thread on how apple ran that comercial in the 80s during superbowl about how IBM was and some 20 or so years later it's Apple acting like IBM did in the 80s! That's flippin awesome I'm not the only one that has noticed this twist of irony!

"At some point, the non-pluses will be stuck without a WebOS update".

Pre and pre plus are almost identical, I'm not sure that I buy that line of logic, if it is just speculaton on your part. Did you hear that from a reputable source, or is it just speculation?

did you misread the specs on the plus version of the pre and pixi compared to the non pluses?? Both devices are exactly the same with the exception the plus versions have more memory. And the pixi plus has wifi.. So ummm explain how the updates won't work on both versions... This should be entertaining......... Soooo share with the class why you say the plus and non plus would eventually have different updates. :-)

Two differences - One very important one.
Palm Pre = 8 GB Flash memory and 256 MB internal memory
Pre Plus = 16 GB Flash memory and 512 MB internal memory

It's the internal memory that makes a difference in how the operating system works. See post below:

ya but WebOS updates are relied on the carriers to release them. They give all the carriers the update and the carriers approve. So the lag in the last update was only one carrier anyways everyone else got their updates within 48hrs of eachother. While big red(Verizon) did their best impersonation of Adobe and released it weeks later cause they took their sweet time approving it.

heck I wouldn't let it past Big Red to of noticed that there was a part of the update that allowed easier access to their aGPS system and the reason for the delay was them quickly coming up with something to re-block the aGPS access.

licensing WebOS is indeed a bad thing. Android does it but there are problems starting to ensue including a fractured update system. Take for example the new EVO has 2.2 I think running on it but phones like the Droid will not be able to handle 2.2. HTC is to blame for Androids fractured infastructure if you really give it thought.

HTC is crapping out like 1-2 new Android phones a month... A MONTH! So they keep making phones like the Nexus One obsolete before they even have a chance. Not to mention on some HTC Android phones they run their own UI on top of Android and other models they don't... That's a good way to fragment an OS.

because once you put HTCs UI on top of the Android platform it's not a True Android OS anymore... It's some kind of mutated version of the Android OS which in the end means it cannot get Android updates because the new updates interfere with the HTC UI.

BlackBerry and Apple and Palm keep there OS on their own devices for the simple reason they don't want their customers to have a fragmented OS and a nice experience. Microsux has enough money to demand the phones that get their OS have to be made a specific way so windows mobile runs on it.. Even then that's a slightly fragmented system.

yes Palm could of licensed their OS.. But at what risk? They are already making a sloooow rise back to the top smartphone company they used to be when they were practically the people that pioneered smartphones. You license the OS out then WebOS could get fragmented like Android...

just look at the forums and all it took was Verizon to sit on one update and everyone freaked out. Could you imagine if there were multiple phones out there that couldn't get the newest update because they were on multiple brands like HTC,Motorola,samsung,LG,,etc..these boards would light up like a Xmas tree and it would make Palms battle back to the top even more hard.

thank you Palm for not licensing. Personally I think if Palm was that much in trouble they could go after Apple on patent infringements dealing with the Phone interface on the iphone. Palms got the patent on that. And a few other things becase once again they figured out what Apple couldn't do with Newton and made a successful PDA and then introduced one of the first PDA/cell phones... Smart phones as we know them now..

so if Palm was really desperate they could of went on a patent war with almost everyone and got a ton of royalty money from a few companies. But I respect Palm for not doing that and act like juveniles fighting over a spot on the playground.

@jfphysics

"At some point, the non-pluses will be stuck without a WebOS update (like Apple 2G and 3G with the new iphone OS.)""

WOW, I have not heard anything that ignorant in a long time. They're the same phone, just more memory chips in one.
And there are not a lot of Plus'es out there either, it hasn't sold very well at all. The pluses got their last update a month after the non-pluses, and still they struggle with several issues that the Sprint's dont. I'd not draw too many parallels to Apple. Half of the Mac community is very resentful of Apples closure on source. The current apple, is not the apple of ten years ago, they've learned to make enemies of friends.

Do you not understand what RAM is?

Pre = 256MB = slow = "too many cards"
Pre Plus = 512 MB = fast = not "too many cards"

iPhone 3G will not get "multitasking" with os 4.0. Why? Because it has less RAM (128 MB)

With more RAM comes more space for a larger operating system with code for more stuff. If they make the operating system larger, then there is no room for the programs on the Pre.

Unless WebOS plans on going nowhere, they will have to abandon the Pre at some point. Good luck getting Windows 7 working on your IBM 8088 PC with 1 MB of RAM.

ok we all understand what RAM is all about but how would that effect updates?

I have a laptop I use once in awhile that still has half the memory that microsux recommends for operating their OS's. Guess what? Yup still gets microsux updates just fine.

when you have a litte amount of RAM available you just have to watch how much you do and expect a system slow down if you have too much running at once.

your theory of the Pre's not being able to get updates like the Pre Plusses can doesn't hold a whole lot of water, sorry. The programing are the same and the processors are the same etc etc. The updates are for the OS itself. Which is the same lines of codes for all WebOS devices.

even if the updates became too much for the original Pre to handle well there would be new Palm/HP devices out there anyways so what does it matter when most people update their devices on average once every Year or Year and a half?

That's the burden of the device and the owner. Too date, the O/S and apps are not very big. TMCs tend to be the result of keeping a dysfuntional number of apps open and static, or going days between reboots. To believe Palm will cease to provide relevant WebOS updates to nonPlus devices is embarassingly naive.

WebOS and all of its processes take up over 200 MB of RAM. When the Pre has only 256 MB of RAM, you end up with only about 40 MB to opperate applications.

For a "computer" with only 256 MB of RAM the O/S is VERY BIG with not much room for improvement.

Again, at some point, Palm/HP will have to abandon the Palm Pre and Pixi. I'm not saying it's gonna be anytime soon, but it will happen in order to advance WebOS. I'm not sure what's naive about that.

I doubt Palm will cut OS updates for their older phones at least for awhile. Correct me if I'm wrong, but it seems that only the Pre Plus comes with 512MB of RAM at present. I would imagine Palm's goal is to actually slim and optimize their OS for speed and battery life before they actually make it more bloated.

Should also note that HP would kind of need to keep updating the old hardware in order to woo businesses into WebOS. Though it takes them longer to replace, large companies might invest in large quantities if HP plays their cards right.

Just because you call someone's thoughts "ignorant" doesn't mean you know what your talking about. Just kind of sounds bullheaded.

ok enough name calling jesus.. Anyways I just thought of something. So jfphysics curious.. If the WebOS is on the flash drive which is 8gb on the original Pre. And the updates are for the OS itself how would that make it so the Pre's wouldn't be able to keep up with their updates before a updated device is released when each update is a couple MB or smaller?

You're going against room convention and general logic, yet, I'm bullheaded. LOL. Palm is required to support all units for two years. For that reason, they can only claim 1/8 of the revenue per quarter. So, you're going to have to wait a while to prove your point. And I'd love for some decent apps to come out that would make 256mb become an actual issue. That would be a win.

Fracturing is not a much of a problem (says the people over at Android Central)

They just root there phone, and get the updates anyways.

Android fracturing is overblown hype really (at least in it's current form).

For 90%+ of of the customer base, they are happy if their individual phone works as they want it to. Your average mobile phone user has no clue what donut, cupcake, eclair, etc. are nor do they know if they are using Android 1.5, 1.6, 2.0, 2.1, etc...

They look at them as different phones with different feature sets but can all (typically) use the same Android marketplace for Apps.

Which leads to the only real downside to the fragmentation... a headache for app developers (due to different hardware/feature sets).

Android (Google) has knowingly sacrificed having a locked in OS/hardware marriage (like Apple and Palm) in favor of widespread adoption.

Looking at the current marketplace, the strategy appears to be working.

I suspect it will start to make some waves soon as customers find that they're unable to run some of the newest apps on their older version phones, see friends and family with new versions, or even reading about nice new features that they could get for free if they had the latest OS version.

Though most of us here are more capable of weathering such issues, I suspect the average person tends to shy away after they've been burned.

Apple is the old...Now we are big enough to push everyone around, they aren't niche anymore. When you are top 10 in an industry you should act like it.

I'm no expert or anything but reading all this makes me think Palm handled the negotiations really well and got the best deal out of it. A lot of people probably thought HP bought Palm for sympathy or that Palm took the first real offer they got, but clearly they played a hard ball. Not sure why company C offered Palm $6-7 a share only to revise it down to $5.50 within a matter of days, but Palm did well to make HP cough up the extra cash at $5.70.

If anything, it shows that HP probably saw that the Palm brand, their IP portfolio and the webOS were too valuable to lose to a competitor. I just hope they now give Palm the resources and support they need to make a phone worthy of competing with the upcoming iPhone 4G and the onslaught of Android handsets. Of course I'd love to see a webOS tablet somewhere down the line, but only if it's carefully thought out so that when it comes out Apple won't even know what hit 'em.

Hi all,

According to CNET it was 6 companies! See Link below:

http://news.cnet.com/8301-1035_3-20005083-94.html?tag=newsLatestHeadline...

I also agree that Android has a VERY fractured market, not just b/c of different updates on different models. Also many care customized to THAT one phone.

Personally, I think HP was the BEST of the lot and I am very pleased at how it all worked out. Take care, Jay

I'd have been a little happier with Cisco to take them back to their business orientated roots. But, HP will help them achieve a balance between business and entertainment. This will be a good deal when it goes through. Can't guarantee success and growth, but probably the best path the follow.

I'd have been a little happier with Cisco to take them back to their business orientated roots. But, HP will help them achieve a balance between business and entertainment. This will be a good deal when it goes through. Can't guarantee success and growth, but probably the best path the follow.

Lenovo
HTC
HP
Apple
Cisco

Apple and HTC were the ones who were in it for the patents.

As happy that I am that palm was bought and by HP. I am somewhat upset, I know someone that works for HP and they are going through a round of layoffs and as you probably guess, most of the employees feel it's so that the company could buy Palm.

While I could be wrong, I don't think the layoffs are so that HP could 'afford' Palm. First, Palm's acquisition price was nothing to HP. They are a huge juggernaut of a company.

If they were laid off because of the acquisition it would be in departments like Marketing, HR, etc... They wouldn't be with programmers and the like. Normally it is the acquired company's employees that face those layoffs. What department does your friend work for?

HP currently sitting on over 12 billion in cash. Agree, the admin crew of Palm are the ones in the hot seats. HP is a world entity. In a soft world economy, I'm sure they have periodic layoffs to keep pace with softening demand for their products. Also possible, some workload might be moving out of the country, closer to the supported markets or manufacturing. Now, if the layoffs are in the division that markets HP's WinMO smartphones, then we have smoke and fire.

very creative and informative article...thanks for posting it!!!

C is HTC. They really need the IP to defend against Apple. However, after reviewing Palm's IP portfolio, they lowered their interest.

A has a lot of cash. B doesn't. Neither one feel the burning desire. My guess is that A is Lenovo, B may be Motorola.

D is only remotely interested. Could be anyone.

Changed my mind.

Motorola is not in it. They are fully committed to Android. I don't know which company B is.
D is a cell phone OEM maker. That's why they are only interested in licensing deal.