Nokia rumored to be mulling takeover bid for Palm | webOS Nation

Nokia rumored to be mulling takeover bid for Palm

by Derek Kessler Tue, 22 Sep 2009 7:03 pm EDT

Nokia n97 with Palm webOS

Try as we might, we simply couldn’t track down the source of this any further than “Europe”, but rumor has it that Finnish smartphone maker Nokia is considering making an acquisition bid for Palm. Nokia, which like Palm, has fallen behind in the smartphone market as Research in Motion and Apple made considerable market share gains. Unlike Palm, Nokia has failed to recapture many hearts, minds, or wallets with its recent releases. James Faucette, an analyst at Oregon-based Pacific Crest Securities, said that a takeover of Palm would help Nokia to “close the gap” between it and the market leaders. Such a takeover would also likely give Palm a much larger research and development budget, Faucette said that Nokia’s $3 billion R&D budget is more than 10 times larger than Palm’s, which is no surprise. Neither Palm nor Nokia would comment on the rumors.

Faucette also claims that while Palm stock is trading around $17, to Nokia it may well be worth $25 to $30 a share. Looking at the outstanding stock currently on the market, that would put the acquisition value at $3.96 billion - $4.75 billion (including the impending 16 million share secondary stock offering). If we were to factor in the ~1/3 of Palm owned by Elevation Partners, the hypothetical bid would balloon to $5.94 billion to $7.13 billion.

Palm stock was buoyed significantly by the news, rising 7.02% ($1.12) to close at $17.07, a new 52-week high for PALM. During the day shares traded as high as $17.50. Yesterday Palm surged 14% in a perfect storm of trading and news. Monday and Tuesday combined, Palm has risen 21.8%, and from the December 2008 lowest close of $1.42, at the close of trading today Palm was up an astounding 911%.

Now, we do have to ask ourselves how likely it is that Nokia would actually make a bid for Palm. It is a possibility, given the age and limitations of their S60-Symbian operating system. It would also give Nokia a significant foothold in the United States, where they have long struggled for traction. Purchasing Palm would not just add to Nokia’s market share, it would also add the Pre, Pixi, and - most importantly - webOS to Nokia’s product portfolio, as well as the still-has-life-left-in-it Palm name.

It would not be unheard of for Nokia to make a large multi-billion acquisition; last summer they purchased Navteq for $8.1 billion. Even after that massive purchase, Nokia has around $9 billion in the bank - more than enough to self-finance a takeover of Palm.

But would Palm be amicable to such a takeover bid? Our judgment is no, as Jon Rubinstein and the rest of Palm seem to have an attitude that they can do it alone and do it better. It is likely that more than a few companies have privately expressed interest in Palm. If Palm’s judgment of their potential position in the expanding smartphone market is correct, they could very well become a large player in the sector in the next few years (which would make a takeover bid even more expensive).

Our friends at sister-site Nokia Experts would probably agree; Palm and Nokia should, and likely will, remain two separate companies.