Palm's WebOS, intellectual property touched off bidding war

Palm's WebOS, intellectual property touched off bidding war

Summary: Bidding for Palm largely came down to HP and a "Company C." The big point: Companies wanted Palm's WebOS for their mobile ambitions.

SHARE:

Hewlett-Packard landed Palm by raising its bid following interest from other suitors after intellectual property and a potential licensing arrangement for the WebOS.

The proxy statement, which sparked a good bit of discussion, provides an interesting read on how HP landed Palm. Simply put, HP almost fell short of acquiring Palm. Palm's outlines the process to sell itself and the role of "Company C," an unnamed outfit that was in the running until the HP deal was actually announced.

Palm covers a lot of known ground such as:

  • The company was in a tailspin after a Verizon Wireless partnership failed to deliver sales;
  • Liquidity was about to become an issue;
  • And Palm didn't have the scale of rivals to really compete.

Once Palm's fate was largely sealed, the company went about auctioning itself off. Palm said it received interest from 16 companies including HP. Six including HP entered nondisclosure agreements. Here's how Palm set up the scene:

The two companies in addition to HP that presented acquisition proposals are referred to as Company A and Company B. A fourth company, referred to as Company C, had initially been in discussions with Palm regarding an intellectual property transaction and later made a proposal to acquire Palm.

A fifth company, referred to as Company D, contacted Palm on March 18 to discuss an intellectual property transaction but did not make a proposal to acquire Palm. Company D did not enter into a nondisclosure agreement and did not review non-public information about Palm. Discussions with Company D continued intermittently until April 15.

The one common thread with all of these suitors? They wanted intellectual property transactions and many of the potential buyers were as interested in a licensing arrangement for things like the WebOS. However, an IP deal wouldn't help Palm all that much. Palm said:

While an intellectual property transaction might improve Palm’s financial condition, such a transaction would not address the longer-term issues of the adequacy of Palm’s scale and resources, and would tend to compromise the value of Palm’s intellectual property portfolio, which management and the Board considered to be a core strategic asset.

Indeed, Company C's early proposals revolved around IP licensing. Through April 17, HP wasn't budging off of an offer for $4.75 a share in cash for Palm. However, Company C proposed buying Palm for $6 to $7 a share on April 18. Palm went back to HP wit its own merger agreement. Company C left an opening after it cut its bid do $5.50 a share. Palm said:

On April 24 Palm’s CEO and advisors communicated to HP and its advisors that, to remain in the process, HP must improve its offer significantly and immediately. Later that day, HP’s financial advisors verbally delivered a proposal to acquire Palm for $5.70 per common share in cash. HP’s financial advisors also requested a five-day exclusivity period. On April 25 HP delivered a letter confirming this proposal with a target announcement date of close of business on April 27 and sent a draft exclusivity agreement covering such period on April 26.

While much has been made about five bidders for Palm, it appears to be a two-horse race between HP and Company C, which could logically be Lenovo and Dell or a few others. When HP matched, Company C declined to go higher, but Palm notes the bidder proposed "an alternative transaction under which it would acquire certain patents and take a nonexclusive license to Palm webOS in exchange for a one-time cash payment of $800 million."

The big question revolves around the identity of Company C. Obviously, Company C felt it needed a mobile operating system badly. HP also decided it needed the WebOS too. While Palm obviously couldn't save the company with its WebOS others think they can do something with the mobile operating system.

Related:

Topics: Enterprise Software, Hewlett-Packard, Legal, Mobility, Operating Systems

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

9 comments
Log in or register to join the discussion
  • RE: Palm's WebOS, intellectual property touched off bidding war

    Company C is obviously HTC. What gives it away is that their second proposal was to buy certain Patents and licence WebOS. The reason HTC would do that would be for the upcoming court case against apple. The other companies you mentioned such as Lenovo and Dell have no need for these patents as they have a vast amount of intellectual property themselves that they could have used against Apple. HTC did not as is proven by their recent submission of a court case against apple which only included 5 patents compared to Apples 20.
    alamfour
    • RE: Palm's WebOS, intellectual property touched off bidding war

      @alamfour Hey friend HTC making a move to buy palm would have been the perfect marriage imagine htc devices with its on OS not this over hyped under achieved andriod crap sorry to all the andriod users i will be purchasing my first andriod this weekend the HTC EVO but not b/c of OS but b/c of the HTC devices and capabilities WEBOS is the best OS period.
      jtpfla3
  • Larry, Sam and Andrew...

    I follow your atricles more often than not. But the name of the blog baffles me. "Between Us" is a term used for interaction between two people. The three of you plus the reader is a foursome. Should the term for the interaction of the four of "us" be "Among Us"? I have recognized misstatements (of the unconventional - or impropper - use of grammar) previously. However, I don't understand how persons who make their living from the printed word can be so flippant with it. It reminds me of people who say "I don't thonk so". Thsy obviously do think- or maybe not- and that statment should be "I think not" or "I think that is not correct".

    Just an observation from the cheap seats.
    qtrback
  • Larry, Sam and Andrew...

    Not meaning to be nit-picky. I follow your atricles more often than not. But the name of the blog baffles me. "Between Us" is a term used for interaction between two people. The three of you plus the reader is a foursome. Shouldn't the term for the interaction of the four of "us" be "Among Us"? I have recognized misstatements (of the unconventional - or impropper - use of grammar) previously. However, I don't understand how persons who make their living from the printed word can be so flippant with it. It reminds me of people who say "I don't think so". They obviously do think- or maybe not- in any event that statment should be "I think not" or "I think that is not correct".

    Just an observation from the cheap seats.
    qtrback
    • RE: Palm's WebOS, intellectual property touched off bidding war

      @qtrback: The name of the blog is "Between the lines"!
      Where's "us"? There's no "us", just "you" and "me", or "you" and "them". Or whatever... No "us".
      Regards,
      Raul
      raul62
    • RE: Palm's WebOS, intellectual property touched off bidding war

      @qtrback You remind me of my boss... and you are being finicky. Worst of all, a critic such as you should be more mindful of their choice of words. Mr. "Thsy".

      That said, the mystery company C is probably indeed HTC. I'm glad HP bought Palm however and I hope a synergy of the two bring further great tidings for dedicated Palm users like me.

      Are there any articles on ZDNet on what the merger might mean for the end consumer? Links please.
      TOA-Gannzter
  • RE: Palm's WebOS, intellectual property touched off bidding war

    WebOS is a joke and a half, and spending money on it was definately a waste of money.
    jfreedle2@...
  • RE: Palm's WebOS, intellectual property touched off bidding war

    you really do suck out of all the idiots who get on here to talk intellect on what they know or don't know you my friend are the biggest loser, goodbye.
    jtpfla3
  • RE: Palm's WebOS, intellectual property touched off bidding war

    Well done! Thank you very much for professional templates and community edition
    <a href="http://www.yuregininsesi.com">seslisohbet</a> <a href="http://www.yuregininsesi.com">seslichat</a>
    yarinsiz