HP’s (news, site) rode to Palm’s rescue and said after the markets closed yesterday that it would buy the struggling smartphone maker for about US$ 1.2 billion.

Expanding HP's Mobile Strategy

“Well, the acquisition is good news for Palm, since they needed a savior,” said Laura DiDio, principal analyst at Information Technology Intelligence Corp. The big question is, ‘What is HP going to do to inject life into a faltering Palm?’

You do have to wonder: Why would HP buy a down-on-its-luck smartphone maker in a fiercely competitive market? 

It’s all about webOS, said Todd Bradley, executive VP of HP's Personal Systems Group.

“Palm’s innovative operating system provides an ideal platform to expand HP’s mobility strategy and create a unique HP experience spanning multiple mobile connected devices,” Bradley said in a prepared announcement.


“The smartphone market is large, profitable and rapidly growing, and companies that can provide an integrated device and experience command a higher share,” Bradley said. “Advances in mobility are offering significant opportunities, and HP intends to be a leader in this market.”

The combination of HP’s global scale and financial strength with Palm’s webOS platform will enhance HP’s ability to participate more aggressively in the fast-growing, highly profitable smartphone and connected mobile device markets, Bradley said.

Palm’s unique webOS will allow HP to take advantage of features such as true multitasking and always up-to-date information sharing across applications.

What About Microsoft?

Analysts said that it’s a no brainer that HP will port webOS to tablets and go head-to-head against Apple’s iPad and any other number of tablets that are set to debut later this year.

What does that mean for the existing strong partnership of HP and Microsoft? HP already markets -- although with little success -- the Window Mobile-powered iPAQs. HP also is preparing to market a tablet running Windows 7. With WebOS in hand, does that mean HP is shifting gears?

Probably not, DiDio said. HP is large enough to market devices that will run one or the other operating system and pitch them to different market segments, or even different geographies. It’s not hard to imagine HP might decide to sell Windows Mobile devices in the U.S. and WebOS devices everywhere else, she said.  “It’s also possible they’ll let the two divisions slug it out.