Cell-phone analysts have pretty much written off Palm, the company that arguably invented the modern smartphone. Palm has been trying to sell itself, and ran through all of the obvious — and some not-so-obvious — buyers without a serious bite.

Ken Werner
Senior Analyst and Editor

So yesterday’s announcement that HP will pay $1.2B for Palm came as a surprise to most of us. Of course, as the world’s largest seller of personal computers and printers, HP can buy pretty much what it wants to, but why would it want to buy Palm? If you’ve forgotten that HP even makes smartphones that would not be a surprise. The company doesn’t even rank in the top 20, and the small number of clunky IPAQ models that HP does sell is sold mostly to enterprise accounts, guaranteeing the company even less visibility than the numbers would indicate.

Palm, on the other hand, after early successes with its Treo line of Smartphones, allowed itself to be overtaken by RIM’s Blackberry and, more recently, by Apple and by Android-based phones from HTC and Motorola. Recent Palm phones have been well received by reviewers but have not done well enough in the marketplace. The proprietary Palm WebOS is well regarded, but the app-mania surrounding the iPhone and Android consumed all of the available oxygen.

So what is HP thinking? "The attractiveness of the smartphone market is compelling to us," said Todd Bradley, the EVP for HP’s personal systems group who until five years ago was Palm’s CEO. HP has been using Microsoft’s unloved mobile OS, and the multi-tasking WebOS is a considerable step up from that. HP intends to "broadly and aggressively deploy" Palm’s software, Bradley said. With Smartphone sales projected to exceed PC sales in 2012, this could look like a tempting strategic move for the world’s largest PC maker. But is it likely to succeed?

I’m not a cell-phone analyst, but Jamie Townsend of TownHall Investment Research (www.townhallresearch.com) is one of the best, and he courageously attempts to keep me abreast of the major developments in the field. Townsend said this morning, "In spite of renewed marketing efforts and the Q2 addition of AT&T as a distributor, we believe that PALM will continue to be unable to reestablish itself as a meaningful player in the handset business. In our view, the recent announced purchase of the company by Hewlett Packard will be completed without any other bidders. We do not believe that Hewlett Packard will be able to either revive PALM’s current poor sales of the Pre and Pixi or, that eventual new handsets incorporating WebOS will represent a meaningful new competitive threat to other handset vendors."

While we’re at it, what did Townsend say about Motorola this morning? "[Motorola's] handset business…has made a key correct strategic decision to leverage the historical Motorola brand name onto the Android operating system environment. We believe Android will emerge in 2010 as the fastest growing OS in the smartphone market which may see a double in market share in the year. Motorola’s offerings of Android based phones, headlined by the Droid and followed by 19 enhanced models during the year indicate to us that the company is most likely to exceed their guidance of 12-14 million Android smartphone shipments in 2010."

That’s a lot of WVGA displays.