MoneyWatch Tech

Palm Is for Sale. But What Does It Have to Sell?

By Erik Sherman

Updated on: April 12, 2010 / 2:02 PM EDT / MoneyWatch

The road for handset vendor Palm (PALM) has been tough, and it apparently has decided that enough is enough. According to a Bloomberg report, the company is seeking bids for a buy-out.

Goldman Sachs Group Inc. and Qatalyst Partners are supposedly on tap to loo for potential buyers, with the list of potential bidders including HTC and Lenovo. It's been clear for a while to anyone taking an unsentimental look at Palm that it faced a bleak future as an independent company:

The Pre handset line, which was supposed to save the company, didn't. In fact, it didn't even come close.
Verizon (VZ) didn't manage to sell Palm products and then AT&T (T) decided that it would put off carrying the handsets.
The company's cash burn rate will eat though the money Palm has left in the back within a year, and maybe less.

However, the biggest reason for the bleak future is the company's management. It has made one misstep after another over the last two years. Last week I thought an interview with Jon Rubinstein showed the Palm CEO to be out of touch with reality, but in hindsight, it was probably the sort of posturing that chief executives inover their heads often undertake, particularly when they want to position their companies for an acquisition and hope for more than a bargain basement price.

HTC as a buyer would make for some interesting happenings in the market. Last month I suggested that it could make sense for Google (GOOG) to buy Palm if for no other reason than to own a sizable collection of mobile computing-related patents for a potential legal battle with Apple (AAPL). However, the same logic applies even more to HTC, which has already been sued by Apple.

Furthermore, that would give HTC its own mobile operating system and might lower its interest in others, like Google Android or Microsoft (MSFT) Windows Phone 7 or Windows Mobile.

Lenovo would be another interesting possibility. The company sold its handset business unit in 2008 to Hony Capital for about $100 million, only to repurchase the business last fall from Hony for $200 million. Are your eyes crossing from that? Given how obvious it's been for a while that mobile is ascendant, I wonder whether the temporary divestment was some sort of financial machination or an attempt to temporarily appease shareholders after a bad quarter. It seems hard to believe that Lenovo could become that disenchanted and then enamored of the same organization all within the period of 18 months. If Lenovo picks up Palm, I'd expect it to use the purchase as a way to enter the U.S. market.