Squeezed between the consumerist cool of Apple's iPhone and the
corporate capabilities of Research in Motion's Blackberry, the ailing
mobile device maker Palm has called in bankers and put itself up for
sale.
Once a pioneer in the emerging market for handheld devices, Palm's most
recent reinvention as a manufacturer of smartphones has failed to pay
off, and sales of the Palm Pre and the Pixi have fallen far short of
expectations.
A string of profit warnings has left the company unloved by investors
and facing the slow dwindling of its cash pile.
Yesterday, however, Palm shares jumped by 17 per cent after news that
the company had called in Goldman Sachs and Qatalyst, the boutique
advisory business set up by the technology analyst Frank Quattrone, to
solicit bids for the company.
The bankers will also examine other options, including raising another
round of funds and licensing some of Palm's technology.
Speculators
have piled into Palm shares in the past few weeks in the hope of a $1bn
bidding war for the company or its assets. The global smartphone market
is growing, and the distinction between laptops and mobile phones is
becoming increasingly blurred, meaning that numerous companies from
several industries are considering their future strategies.
The phone manufacturers HTC and Nokia, and Lenovo, the computer maker
listed in Hong Kong, are among the companies likely to examine a bid for
Palm, analysts said. Dell, the US PC manufacturer, is also often
mentioned in connection with the company, as is Microsoft, whose
operating system for smartphones has still not gained the traction the
software company hoped.
Palm's webOS operating system has won technical praise for its speed and
ease of use, and the Pre was dubbed by some reviewers on its launch
last year as a potential "iPhone killer".
Neither it, nor the successor phone, the Pixi, in fact captured the
public's imagination.
According to its most recent quarterly results, Palm shipped 960,000
devices in the three months ended February, but only 408,000 were
actually sold to customers. The company said it had a cash pile of just
under $600m, but some analysts said it could see outflows of $150m in
the next three months and no sign of profitability on the horizon.
Palm shares jumped almost one-third last week as rumours of potential
bidders began circulating, and news of the appointment of Goldman Sachs
had sent them up a further $0.96 to $6.12 by lunchtime trading on the
Nasdaq stock exchange yesterday. That took the company's valuation back
over $1bn for the first time since before its last profit warning.
A sale at the current price would be a dismal end to an illustrious
history that saw the company valued at $53bn on its frenzied first day
of trading on Nasdaq in 2000.
That same day, Apple was worth just $20bn. But a successful sale of the
company would limit some of the losses for Elevation Partners, the
private equity firm in which the U2 frontman Bono is a partner, after it
spent some $460m accumulating a 30 per cent stake.
Founded by the engineer Jeffrey Hawkins in 1992, Palm was a pioneer of
the personal digital assistant (PDA), handheld devices where users could
enter notes and calendar items using a pen on a touch screen.
Newer devices such as the Blackberry left Palm trailing in the market
for business users, however, and Apple's entry into the consumer market
left Palm struggling to find a niche.
