In recent weeks, Palm, which helped pioneer the market for personal digital assistants, has become the subject of merger rumors. With the purchase of Palm, suitors would receive the WEBos software that competes against mobile operating systems from Apple, as well as Google. For Palm shareholders, a sale would end the roller coaster that has been Palm. Since December, 2008 the stock surged more than 10-fold before erasing most of the gains in recent months.
Recently, Palm hired investment banking power house Goldman Sacks and tech guru banker, Frank Quattrone, to sort out the available options for the company.
Analyst opinions on the value of Palm have been just as erratic as the stock price. Among the most notable came from RBC analyst Mike Ambramsky who put the value of the company between 10 and 14 dollars per share, mentioning Hewlett-Packard as a most likely buyer.
In his research report, Ambramsky wrote, "Potential acquirers may look beyond Palm's struggling hardware business and capital structure ... and see a rare opportunity to acquire a modern Smartphone OS, unique R&D team and budding developer ecosystem."
Many argue that the sales price of Palm will not necessarily depend on the company’s financial condition. Supporters of this theory suggest that Palm’s real value lies within the company’s intellectual property as the company possesses a rich portfolio of patents and is home to the best software engineers in the industry.
Previous press reports have indicated that Palm’s largest capital backer, Elevation Partners, has been insistent on an acquisition price tag of at least $1 billion. The RCB Capital Markets’ estimate of $10 to $14 a share would fetch a near $1.7 billion, at the low end of the estimated price range.
Elevation Partners, who controls around 30% of the company, has a cost basis of about $5.41 (factoring in the convertible preferred shares). Any offer to purchase Palm must appease there largest shareholder and there stern price tag of at least $1 billion.
Disclosure: No position