Investing in Palm: Acquisition Rumors a "Reasonable Possibility"
By Ian Cooper
On Monday, news surfaced that Palm hired Morgan Stanley to evaluate strategic alternatives, which could include the possible sale of the company. And, surprisingly, likely buyers could include Hewlett-Packard or Dell, according to Investors Business Daily.
There’s really no mystery as to why some one would want to buy Palm. This is a company with $518 million in cash with strong cash flows. Already, many buyer names are being thrown out there, and include the likes of Dell and Hewlett-Packard, which could use Palm as a stepping stone into the wireless services market.
According to Investors Business Daily, Hewlett-Packard “holds a tiny share of the smart phone market.” By buying Palm, HP could see stronger relationships with the likes of Sprint Nextel and Verizon. As for Dell, there’s growing speculation that the company could move into cell phones.
There’s a slim to nil chance that Nokia would buy Palm (considering that Palm holds no real attraction for Nokia, and the fact that both use different operating platforms). Not even Motorola is a likely buyer of Palm. Motorola just reported that Q4 profit fell on poor sales of phones, plus, it’s still getting over the acquisition of Good Technology. Plus, it doesn’t help that Motorola’s cell phone unit head just resigned. And not even Nokia may be a likely buyer. They, too, use a different operating system than the one Palm uses.
Could we see a bidding war? Who knows? As of now, sources, like Unstrung.com are already reporting that the company could be sold in the $20 range, a $3 premium to its current $17 price tag.
Take care,
Ian L. Cooper,Editor, Early Alert Trader