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Lenovo considering purchase

Palm is having a very hard time in the smartphone market both in the U.S. and abroad. The company is seeing its profits drop and its handsets are failing to sell in the numbers that the company and analysts expect. 

The poor sales of its handsets have led the company to step back and look at what it needs to do to ensure profitability and the survival of what was once one of the most popular brands in the industry. Palm is considering all options, including selling the company. Palm reportedly started looking for a buyer earlier this month. One of the early firms that were looking into acquiring Palm was rival smartphone maker HTC.

HTC has passed on the deal after looking at Palm's books. The most likely remaining candidate for the purchase is computer maker Lenovo. Lenovo has a line of handsets that it sells in its home Chinese market, but the Lenovo handset line has no foothold in the U.S. market.

Analyst Lu Chialin from Macquarie Securities in Taipei said, "A most suitable candidate will be a mainland Chinese company. They've got a lot more free cash and don't have the brand presence in the United States, so that will all give them that boost they need."

Reuters reports that its sources in investment banking have confirmed that Lenovo is considering a bid for Palm, but offered no specifics. Lenovo has offered no official statements on its intent to make a bid for Palm, but its stock has risen on the rumor of purchase.

Lenovo is reported to have the cash on hand it would need to purchase Palm if it chooses – at the end of 2009, Lenovo had $2.4 billion in cash. Palm is reportedly looking for about $1.3 billion from suitors. While the possibility of an outright sale is on the table at Palm, the company also has other plans. One of the possibilities would be to license its webOS to other companies to use on their smartphones. 

Palm may also simply choose to continue as an independent company. 
Financial Times reports that Palm CEO Jon Rubinstein believes that Palm can continue and survive. Rubinstein says he is "bullish" on the long-term prospects of Palm. He stated, "I believe Palm can survive as an independent company. We have a plan that gets us to profitability."

FT reports that Rubinstein points out that Palm had $592 million gross cash position at the end of Q3. It would take almost all of that money to get palm through until it can return to profitability. Analysts believe that Palm won’t reach break-even until May of 2012 and by that point it will have spent $534 million of its cash reserves.

Palm is working on a new generation of handsets that it hopes will fare better on the market than its current Pre and Pixi devices. Rubinstein said, "[Palm is working] fast and furious on new handsets." Analysts at RBC Capital markets told the FT that Palm could receive bids as high as $2 to $3 billion considering it has a market cap of $820 million.

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RE: Locked to a carrier...
By soloman02 on 4/23/2010 1:00:02 PM , Rating: 1
When at&t and Verizon get LTE fully deployed (late 2011 at the earliest, more likely mid/late 2012), locking phones to a specific carrier will mostly be gone. Phones that use LTE will work on at&t or Verizon's network. Sprint is using WIMAX which is different from LTE so Sprint phones will not work on Verizon or at&t and vice-versa. But at least consumers will have more choices of phones between at&t and Verizon.

RE: Locked to a carrier...
By DanNeely on 4/23/2010 1:28:10 PM , Rating: 2
Not necessarily. They won't be operating on the same frequencies, which makes locking them relatively simply. Eg you can use an unlocked iPhone on TMobile in the US but only on the 2.5G; it doesn't have hardware support for TMobile's 3G channels. If software defined radio comes to handsets (it's already starting to show up in the towers) then a firmware patch would allow switching networks (potentially to include going from GSM to CDMA, or LTE to WiMaxx) but the requirements are different than on base stations where using an extra few percent power for generic hardware instead of dedicated is much less of a problem.

RE: Locked to a carrier...
By soloman02 on 4/23/2010 1:46:21 PM , Rating: 2
Chip manufacturers will most likely make chips that work on the frequencies that at&t and Verizon are going to use. This is because it is cheaper to design and package ONE chip that supports multiple frequencies in the 700MHz domain than to design and package two chips, one for at&t phones and one for Verizon phones. This is the reason chip makers came out with quad band chips for at&t GSM phones so that they could make one chip that would work for phones sold around the world.

RE: Locked to a carrier...
By PandaBear on 4/23/2010 3:47:14 PM , Rating: 2
There are already unified chips from Qualcomm that works as world phone, i.e. having both CDMA and GSM in it. The problem will continue even in LTE since it is because Verizon that doesn't want a SIM card rather than Qualcomm doesn't work with SIM card, that we don't have SIM in the US CDMA.

The carrier will bring this to the LTE as well, you can count on it, except that the equipment will be cheaper. A phone coming out without being tested for the unused frequency / protocol will suck big time if switched to another protocol/frequency, like what happen to iPhone on T-Mobile, except worse.

RE: Locked to a carrier...
By omnicronx on 4/23/2010 4:55:50 PM , Rating: 2
IMO, it is only an issue in the interum, Verizon's plan is to have LTE rolled out to its current CDMA footprint by 2013 (with most high density areas upgraded long before that). At that point, CDMA fallback makes no sense.

This is similar to what Bell and Telus have done in Canada. They were previously CDMA carriers and will also be making the switch to LTE, but in the interum, they have deployed a GSM UTMS/HPSA network with 93%+ their CDMA footprint. So they basically run a CDMA 2/3g network alongside their new GSM UTMS network.

So now you have a choice, you can get a CDMA phone (limited to 3G) or a UTMS phone that has no 2g fallback, but is pretty much irrelevant as the UTMS network is as large as the previous CDMA network. (i.e you are not losing any coverage). This is how Bell and Telus got the iPhone on their network, and also makes the transition to LTE that much easier.

If I were to guess, Verizon is going to follow suit, it makes no sense for them to roll out multiple band phones. Phone cost would be higher, supporting two networks would cost more and phone issues (such as battery life from switching bands) would cause more headaches.

RE: Locked to a carrier...
By PandaBear on 4/24/2010 2:45:24 AM , Rating: 2
Legacy system fall back is important for a while because people don't just throw away their old GSM/UMTS/CDMA phone right away, some people still use their old phones for years let along international traveler with roaming.

The good thing is that these newer equipment for LTE are backward compatible with most older tech and will make switching as painless as possible. Heck, that's what LTE stands for, long term evolution, not revolution.

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