Hewlett Packard’s purchase of Palm for $5.70 per share should be a case study in corporate mergers. The bottom line question is this: Is Palm worth $1.2 billion?
Worth is more than just what’s left over after subtracting liabilities from assets. There’s the company’s prospects for the future. There’s the intangible of the worth of the workforce. In Palm’s case, neither of this appears to justify the price.
The company has posted $430 million in losses over the last 4 quarters. It has $202 million in cash (a $1.25 per share) but at the rate it is bleeding cash, even that is iffy.
The company’s smartphone business has dropped off and there does not appear to be solid prospects of recovery. As for the workforce, chief competitors such as Apple have been gaining.
Some observers place the worth of the company more near zero that $1.2 billion. Sieman’s and Motorola paid suitors to take their money-loosing cell phone operations off their hands. Will Hewlett Packard someday do the same?
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5 years ago
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