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Apple Wanted Palm for Its Patent Wars

Yesterday afternoon brought an interesting story from Dan Frommer that Apple (AAPL) tried to buy Palm (HPQ), and that Google would have entered the bidding had Eric Schmidt known Steve Jobs wanted the company.

It's the first confirmation that Apple was interested in Palm, but it should be no surprise. With so many companies jockeying for position in mobile, it was inevitable that everyone involved would reach for their patent clubs. Unfortunately for Apple, it remains way behind because it started in mobile so much later than everyone else.

According to Frommer's source, a number of big names were looking at Palm:

  • Apple was primarily interested in Palm's more than 450 granted patents and another 400 patent applications on file, and it might have kept the company going to attack RIM (RIMM) on the keyboard-phone front.
  • RIM also wanted Palm and had a high bid, but HP (HPQ) upped its own offer to take the company.
  • Google was interested, but only because Apple might want Palm. But Google didn't know Apple was bidding, and so didn't bother to make an offer itself.
The potential interest of Google and Apple was strategically obvious back in March. Apple was already involved in multiple mobile patent lawsuits, either on the giving or receiving end. That's why Apple wanted Palm's body of patents, because it would add substantially to the number it could bring to bear in a legal action over handsets. It's why I wrote that Google should buy Palm as a weapon it could point at Apple:
Apple has made it clear that it wants to burn a number of competitors, particularly those working with Google. So perhaps Google should buy Palm. It would get a massive club for any upcoming legal battle. As of today, Palm's market cap is about $937 million. Google wouldn't need much of a premium, as investors are likely to welcome any chance to jump without a total loss, and gathering that much cash for Google is trivial.From the point of using IP as a weapon, Google also isn't the only possibility. Microsoft (MSFT) could purchase Palm just to keep it out of Google's hands. Or Apple could buy the company to deny the legal advantage to any of its competitors. It comes down to this: Palm could actually be worth far more as a collection of patent filings than as a going concern.
Apple still has a large number of patents, but as we've seen in its suit against HTC, it's had to reach beyond mobile technology and into aspects of operating systems in hopes to find IP cannon fodder. In squaring off against Nokia (NOK), the lack of a Palm patent grab bag may end badly and raise the question of why Apple, with so much cash on hand, wouldn't make a smart investment in some legal protection.


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