While two Wall Street analysts have decided that Palm's
The news of Harbinger Capital's giant stake in Palm, which stood at 9.48% at the end of March, comes when Wall Street's sentiment toward the company has turned deeply negative. Not only have Morgan Joseph & Co's. Ilya Grozovsky and Canaccord Adams' Peter Misek given Palm a price target of $0, but only two of the 28 analysts covering the company (according to Thomson/First Call) rate its shares a buy. If I thought Palm would continue trying to slug it out in a fiercely competitive smartphone market, I might agree with the pessimists. But since the company has already hired Goldman Sachs to help it find a buyer, it looks as if Palm has resigned itself to being another storied tech pioneer that couldn't stay independent anymore. And in that context, I think the company is anything but worthless.
I think the best historical comparison here is IBM's
Why HTC needs to act
So which company can play the role of Lenovo for Palm? Like my colleague Rich Smith, I'm skeptical that it'll be Lenovo itself. But I think either Huawei Technologies or HTC could work. Both companies have been rumored to covet Palm, have the cash to pull off an acquisition, and could quickly bring down the company's manufacturing costs. But while Huawei could benefit from buying Palm -- especially if it gets Palm's engineers working on some good Google
- HTC's smartphone lineup gets an immediate branding boost. To put it mildly, HTC's brand power isn't at the same level as that of Apple
(Nasdaq: AAPL)or a Nokia (NYSE: NOK). Perhaps Palm's brand isn't, either, but the company's legacy does give it some additional value.
- Palm's technology could be ported to HTC's existing phones. HTC has had some success in differentiating its Android and Windows Mobile phones from the pack through its Sense user interface. But integrating some of the neat features in Palm's webOS operating system, such as its live application previews and cascading notifications, would take the company much further.
- Apple, Apple, Apple. There's a big reason Steve Jobs chose to send his lawyers after HTC instead of, say, Motorola
(NYSE: MOT)or Samsung: Those companies could probably sue Apple for patent infringement as easily as Apple could sue them. With Palm's patents in the picture, Jobs might have a weaker hand against HTC going forward.
Palm's hopes for reliving its glory days as a smartphone leader may be shattered, but this doesn't mean a company such as HTC won't assign it a price tag well north of $0. I'm guessing that Harbinger Capital is well aware of that.