HP/Palm, Could it Actually Make Sense?

Yesterday HP confirmed that it is acquiring Palm for $1.2 billion.  No small bet for HP a company that today has a market cap of a little over $4 billion.

Palm has driven itself deep into the ground.  They had the early lead in the convergence of mobile/computing but due to a number of things (my guess is culture/politics played a big roll) they lost it to Apple, RIM and Google‘s Android.  People sometimes forget but Palm had great mobile APPs on their early phones in 2002.

Over the last few years they tried to take back the market that they themselves gave away with a new mobile platform called webOS and a new line of phones starting with the Pre.  The bet did not work, hence the acquisition by HP.

However ask any programmer and they will tell you that webOS kicks ass to work with, however the small addressable market trumped the powerful OS.  Additionally there is only room for so many operating systems in mobile.  My guess is that 3 is the max, and today those are Blackberry, iPhone and Android.

So if I were running HP, which they should consider, I would do the following to win:

1.  Go to Adobe and have them create a Flash to webOS tool kit.  Pay them if you have to

2.  Build a ton of Phones and sell them at cost.  For the first 2 years I would sell every phone at zero margin.  The Pixi and the Pre are a good start, slash the prices and get them into the market.

3.  Budget $120 million on app developments, you just spent $1.2 billion for a OS, budget another 10% to drive app development.  I would have this money go into 3 areas, paying independent software shops to build specific apps, developer spiffs and create the software to be able to auto port Android, iPhone and Blackberry APPS to webOS

4.  Build lots of tablets of different sizes on webOS and make sure that they have forward facing cameras.  Sell them at break even for the first 2 years.

5.  Build desk/wifi SIP phones running webOS also with front facing cameras.  Sell them at break even for the first 2 years.

6.  Build a cloud based iTunes, this one you have to do soon.  Maybe partner with Amazon on this.

7.  Leverage the shit out of the cloud.  Make all cloud services, Gmail, Yahoo Mail, etc., kick ass on this phone.

I am sure I will think of more things but this was just off the top of my head.

The point is that HP needs to realize that to win against Google’s Android, Apple’s iPhone/iPad or Rim’s Blackberry, which is what they have to do, they are going to have to be aggressive and not tip toe around the market.  Otherwise they should just take the write-down now.