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Palm's Wild Ride Ends in H-P's Hands

Hewlett-Packard (HPQ - Get Report) moved in to save Palm (PALM) on Wednesday, acquiring the smartphone maker for $1.2 billion.

H-P offered $5.70 per share for the company, a 23% premium over Palm's closing price of $4.63 Wednesday.

In after-hours trading, Palm was up 27.4%, or $1.27 to $5.90. H-P shares were down 38 cents, or 0.7%, to $52.90 after hours.


The move caps a wild ride for Palm, which was lifted from oblivion last year by a new leadership team focused on building a new touchscreen-centric smartphone operating system to rival Apple's (AAPL) iPhone. The Palm Pre and its smaller follow-up the Pixi did not sell well at Sprint (S), however.

To follow that dismal experience, would-be sales partner Verizon (VZ) snubbed Palm in favor of a Google (GOOG) Android-powered Motorola (MOT) Droid phone.

Palm's sales woes and dwindling finances forced the company to seek alternatives, namely a buyer.

With H-P, Palm could hardly have found a better partner. H-P, the No. 1 computer maker, has been nearly absent in the mobile phone market. Rivals like Dell (DELL) and Asus have made plans and partnerships to make phones, but H-P has lacked a plan -- until now, that is.

"Palm possesses significant IP assets and has a highly skilled team. The smartphone market is large, profitable and rapidly growing," H-P personal product chief Todd Bradley said in a press release.

"We're thrilled by HP's vote of confidence in Palm's technological leadership," Palm CEO Jon Rubenstein said in the press release. Rubenstein is expected to remain with Palm as a unit of H-P.

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