Should Dell Buy Palm?

Dell (DELL) is allegedly pondering a smartphone, but a better move may be to merely buy Palm (PALM) now that it illustrated that its Pre and WebOS are the real deal.

A Dell-Palm combination is floated by Bob Faulkner, a contributor to RealMoney.com. In an open letter to Michael Dell, Faulkner makes his case (you can also find via Yahoo Finance):

With the advent of the Apple iPhone in 2007 and its subsequent imitators, it has become apparent that we’re seeing “computing” evolve once again. Phones are no longer just something you speak into. They have transformed into a portal for taking the Internet wherever you go.

I realize that you have been busy the last couple of years trying to right the good ship Dell, but your lack of participation in this market segment will hurt the company going forward. There is another rumor making the rounds that you’ve been feeling out suppliers in an attempt to enter the market at some point. While, if this is true, I’m glad to see some movement on this front, I fear that this approach is doomed to fail.

Let me be so bold as to suggest that there is a ready-made solution for you that I recommended nearly two years ago: Dell should buy Palm. Think about it, Michael — it’s a match made in heaven. You get a solution, and they get the stability, influence and purchasing power of Dell.

Faulkner further argues that Dell could help Palm out with its two biggest hurdles. First, Palm needs to attract software developers and Dell’s heft can help (with a few financial incentives of course). In addition, Palm needs distribution. Dell has that in spades.

Add it up and the Dell-Palm combination makes some real sense. Thoughts?

Comments

[Yagottabe Kidding]

Why should Dell buy Palm when Motorola's handset division is ready to go, uses "industry standard" Android (and WinMob), and actually has products on the street?

Or how about Dell simply contract with HTC and have EVERYTHING Palm has right now at literally HUNDREDS OF MILLIONS of dollars less cost?

How much would failing Palm cost Dell? 1.5 to 2 BILLION dollars?

Oh yeah, THAT would eb a good buy, alrightee!

Sheesh.

2009 Jan 15 02:51 PM

[Zen]

OK, what hardware does Apple have that HTC does not? And look at where iPhone is compared to G1 (a HTC Android phone). In this industry, the sum is always bigger than the parts. The Zen factor and some design smarts can pull one phone way ahead of the rest. That makes Palm worth more to Dell than its worth in the market.

2009 Jan 15 05:20 PM

[rd4sndk]

Palm is more a Microsoft buy. MS needs desperately to have a winning solution in the handset space. Their mobile OS is loosing and will continue to loose to Apple and Googles offering. MS has more to gain than Dell. For that matter, HP needs to enter the space as well. No doubt, Palm is being peddled to all of these high tech giants and thats clearly the reason Palm's SP is moving higher.

2009 Jan 15 05:57 PM

[JQP]

This seems like PALM pumping, short frightening crap. Hope you and yours made money today. It seems like the last point up happened after this was posted,

If Dell were to buy them, it would have to be more like 3 a share cause of all their debt and no product. And I still can not see how this product, coupled with few carriers, makes the phone the best of breed. And the space is so competitive.

Palm would have to come back down to earth for anyone to look at them.

And short covering in a recession only goes on for so long.....

2009 Jan 15 07:38 PM

[Kris Tuttle]

I agree that this is there more to fan flames. That Palm might be more acquirable now is clear but the stock at these levels actually makes it very hard, if not impossible to purchase.

This stuff has been in gestation for a while and most players in the industry knew about it but there was no acquisition. Don't forget that Elevation may just want to really win big on this over the long term and this is still early.

The stock is probably ahead of fundamentals now because of all the excitement and lots of short-covering. But if they can execute the plan the shares could certainly be with $11-12 by YE. (Remember the real question here is going to be gross margin, that's what makes the difference between Palm worth $5/share and Palm worth $15/share.)

2009 Jan 16 09:22 AM

[Peter Lynch]

This will be a marriage made in hell, like merging Google with Microsoft. Palm may be small right now, but it is 100X more innovative than Dell. There will be a serious clash of corporate cultures that will probably end up with most, if not all, talented Palm engineers leaving the company.

Palm shareholders will be much, much better served long-term if Palm stays independent and grows organically.

2009 Jan 17 11:39 AM

[Bruce Potter]

You are so right regarding the loss of innovative talent should dell buy palm. Every innovator who was an engineer at Dell has been kicked out in place of a commodity distributor management transition. This occurred from 1993 to this day! Palm engineers - watch out!!!! You are next should Dell buy you. No compatibility at all!


On Jan 17 11:39 AM Peter Lynch wrote:

> This will be a marriage made in hell, like merging Google with Microsoft.
> Palm may be small right now, but it is 100X more innovative than
> Dell. There will be a serious clash of corporate cultures that will
> probably end up with most, if not all, talented Palm engineers leaving
> the company.
>
> Palm shareholders will be much, much better served long-term if Palm
> stays independent and grows organically.

2009 Jan 19 09:21 AM

[Bruce Potter]

In addition, Dell is a commodity maker!!! It is in a very painful predicament and cannot decide whether to go the way of apple or to remain a commodity making distributor. They require Intel and Microsoft on the one hand (making it a commodity with two guerilla's power greater than Apple) or must go it alone as Apple and invest in R&D (too late now). Dell is not an innovator or even manufacturer! They are a PC assembly and distributor company - a commodity making broker!!!! I know this and can show that this is the case by much by data, information and their structural and organizational transitions/changes. Dell's in a real pickle having once changed his vision of the company with the help of Andy Grove!!! He must kneel to MS and Intel for any hope at all. But Intel can know longer cheat (mean ugly guerilla power) having Apple as their customer.
Palm cannot come against Microsoft and Intel and, Apple is far to innovative and successful to beat them alone. Palm will remain a niche while this current technology/product is hot. They need a great influx of innovative capital and vision to move forward. Can they? Why would Dell do this? Unless... Well, thats the way it is and we will see what it shall be after really great pain to make it to be! I know a way - Do the right thing!!


On Jan 19 09:21 AM Bruce Potter wrote:

> You are so right regarding the loss of innovative talent should dell
> buy palm. Every innovator who was an engineer at Dell has been kicked
> out in place of a commodity distributor management transition. This
> occurred from 1993 to this day! Palm engineers - watch out!!!! You
> are next should Dell buy you. No compatibility at all!

2009 Jan 19 09:58 AM