A bunch of reporters are spreading the rumor that Palm is up for sale. While some claim Palm is in no hurry, others flatly predict Nokia is going to buy Palm. Yes, the Palm team is no longer as influential or generating the buzz it once did in the first years after the Treo’s introduction or even when Palm bought the Treo line.
Still rumors of Palm’s sale — like Apple’s imminent death a decade ago - appear to be greatly exaggerated. As Ed Hardy wrote last September:
Rumors that Palm is going to be bought out surface a couple of times every year, but these never turn out to be based on facts.The timing for Palm seems wrong — yes if the ship were about to sink you’d want to sell while it’s still afloat, but thus far it doesn’t seem to be that bad. For 2007, Palm seems to have important new products coming, while it has recently enjoyed iPhone-like gross margins in excess of 30%. The stock has been in a trading range for nearly 3 years after recovering from the bottom in early 2004.
Perhaps Nokia has done poorly — particularly with US smartphone buyers, but the idea they would buy Palm is just silly:
- Nokia already has a smartphone operating system and various BlackBerry-type phones.
- Nokia knows how to make hardware, so nearly all of their recent acquisitions seem to be software. What would they do with the Palm OS software if they bought it? (See #2 above)
- Has Nokia ever done a billion dollar acquisition? Last year’s purchase of Intellisync was less than $500 million, but Palm (at least for now) has a market cap of $1.7 billion.
- Large technology acquisitions with incompatible technologies are usually a disaster. The only things that saved the HP-Compag merger were that a) some divisions were weak enough to shut down (e.g., Compaq peripherals, HP PDAs) and b) for some class of products (notably PCs) both companies use the same technology.
- When acquisitions (rarely) makes sense, usually it’s to acquire smaller firms that are into markets where they aren't — when it's quicker to buy in than to work your way in (A good example is Cisco getting into the home market by buying Linksys). Nokia has an unusually broad range of products, so there would be considerable duplicated and wasted technology.
- Silicon Valley firms don’t well when acquired by outsiders.
- As the biggest handset maker, Nokia would face certain antitrust review, and could face particular problems over the combined smartphone share.
- Nokia has exited CDMA phones and will be unwilling to give Qualcomm any negotiating leverage until the current impasse (with Nokia’s threat to not renew its agreement to pay Qualcomm W-CDMA royalties) is resolved.
- In its best years, Motorola has had a Silicon Valley-type culture, and its middle management is trained at Northwestern, which is certainly similar to many of the other practically-oriented among the top business schools.
- Motorola doesn’t have much of a smartphone platform strategy. The first decent smartphone in years is the Windows-based Q. In 1998, they were one of the earliest Symbian shareholders but later dumped their shares: now all they have to show for it is three discontinued phones and one current mode (although the forthcoming Motorizr Z8 could be a serious entry.)
- Motorola was once interested in Palm OS (for which Palm now owns rights). In response to their smartphone problem, 1½ years ago Motorola thought it had bought PalmSource — which would have been a better fit than then the actual outcome.
- Both Motorola and Palm are trying to use Linux for the lower layer of their respective platforms.