HP pledges major investment in Palm

Hewlett-Packard has pledged to make significant investment in the R&D and sales operation of its latest acquisition, Palm, and hopes to exploit its commercial channel to tout the consumer-oriented Palm portfolio in the business world. HP announced the $1.2bn acquisition on Wednesday, but th

Hewlett-Packard has pledged to make significant investment in the R&D and sales operation of its latest acquisition, Palm, and hopes to exploit its commercial channel to tout the consumer-oriented Palm portfolio in the business world.

HP announced the $1.2bn acquisition on Wednesday, but the market reaction to the purchase was muted, with HP stock flat in after-hours trading.

Nevertheless, speaking on a conference call, HP vice president of IR, Jim Burns, said that Palm's $190m R&D operation would be increased.

"We're going to be increasing the sales and marketing also. So we are going to be taking this platform, which today exists in smartphones and taking it much broader than that," he said.

Burns added that HP would be rolling out a "significant retention programme" and expected Palm CEO Jon Rubinstein to remain on board.

Tina Teng, senior wireless communications analyst at US-based  iSuppli, said that HP's move had implications "far beyond cell phone hardware."

She continued: "The battle for dominance in the high-tech world increasingly is focused on the mobile Internet. Any company that can manage to control the flow of revenue from wireless data users - coming from subscriptions, ad sales or app store revenues - stands to benefit enormously.

According to iSuppli's most recent figures, worldwide smartphone shipments are predicted to rise to 247 million units this year, a 35.5% increase on 2009.

Palm was the world's 10th largest smartphone brand during Q4'09, accounting for 1.5% of unit shipments, said iSuppli, and Richard Holway, analyst at TechMarketViews, said this small, declining marketshare meant he struggled to see the logic in the deal.

"Palm, and its associated operating system webOS, has a tiny share of this market," he said. "HP has a long standing partner in Microsoft and the logic would have been for HP to build a smartphone around Microsoft Mobile - to go against Google Android, Apple and RIM."

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