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Mobile device maker Palm (PALM) has agreed to be acquired by computer giant Hewlett-Packard (HPQ) for $1.2 billion. Under the all-cash deal, Palm shareholders would receive $5.70 per common share, which represents a 23% premium to PALM's preannouncement price. The acquisition appears to be a real positive for HP, since it allows it to enter the rapidly growing smartphone market. The most valuable component of Palm is arguably the advanced webOS operating system, which HP could integrate into its nascent line of mobile devices.

Hewlett-Packard makes a very attractive partner for Palm, because it has the financial strength and global scale to substantially improve Palm's position in the highly competitive smartphone market, which includes such giants as Apple (AAPL), Research In Motion (RIMM), and newcomer Google (GOOG). The deal, which is still subject to regulatory and shareholder approvals, is expected to close by the end of July.