HP buys Palm for $1.2B US

Technology giant Hewlett-Packard Co. has purchased ailing smartphone maker Palm Inc. for $1.2 billion US, HP announced Wednesday.

HP said it will pay $5.70 a share in cash for Palm, a U.S. smartphone maker that ran into commercial problems against iPhone and other next-generation communication devices.

"The combination … will enhance HP’s ability to participate more aggressively in the fast-growing, highly profitable smartphone and connected mobile device markets," the company said in a news release.

California-based Palm has been losing money for months and faced a cash crunch as the company's well-considered Pre device failed to catch on with consumers, experts said.

In its latest quarter, Palm lost $117.9 million, and $226.5 million for the nine-month period.

HP sought Palm to get a larger share of the new mobile market and, with Palm's share price hovering around $4, a takeover appeared to be a cheaper route into this sector, analysts said.

Last September, Palm's stock peaked at $18.09, then steadily declined as the company's fortunes waned over the next seven  months.

Palm launched its Pre smartphone in January 2009 amidst expectations the new device would provide the first real competition to Apple's iPhone.

Instead, a bizarre ad campaign, an ill-conceived exclusive marketing deal with low-volume carrier Sprint and few applications for users led to disappointing sales.

Palm's chief executive officer Jon Rubenstein has already said Pre sales this year will be "well below" forecasts.