From Minyanville today:
Bye bye Palm (PALM)! Takeover rumors have been swirling around the beleaguered smartphone maker for weeks, and indeed, Hewlett-Packard (HPQ) just announced that it’s acquiring Palm for $5.70 a share, a 23% premium to Wednesday’s close.
First things first — if you own Palm, take the money and run. Deals can and do fall apart for a variety of reasons and you don’t want to be caught holding the bag — especially because Palm also lowered fourth-quarter guidance in an SEC filing. It now sees sales of $90 million to $100 million versus a consensus of $165 million.
HP sounds very unlikely to back out, but you never really know, and trust me — you don’t ever want to hear the phrase “material adverse change.”
But does this deal actually make any sense?
Let’s examine some numbers.
HP is on track to generate a whopping $123 billion in sales this year. That’s big. Really really big. Palm is miniscule in comparison with a roughly $1 billion annual revenue stream that is actually shrinking — so forget about it attaining the exponential growth required for it to make a dent in HP’s massive bottom line.
Palm is also losing money right now, and those losses will only get bigger because HP is going to have to drop tons of cash into Palm to revamp product development and marketing.
Now, let’s look at what really matters — the fact that HP is actually doing something exciting.
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