Acquisitions

• It’s been a while since we have heard anything from Dell about their supposed entrance into the smartphone market. This past March, Michael Dell said “It is true that we are exploring smaller-screen devices. We don’t have any announcements to share today, but stay tuned as when we have new news we will share that with you.” But will Dell actually waste their time trying to produce the phone or will they buy their way into the market? Dell has had few chances to prove themselves in the consumer electronics world. Most notably, the launch of their Dell DJ in 2003, which failed miserably. It was slow, had terrible packaging and tried to ride the coattails of the iPod.  Let’s face it, with the Palm Pre and iPhone now in full force, Dell trying to introduce something innovative will end up being just as big a flop if not more embarrassing than the Mp3 player (I imagine it would look like the image above). What makes the most sense? A Palm acquisition. The Dallas Morning News writes:

“expectations are growing that Dell is about to make a major splash with a corporate acquisition. While the smart money seems to be on Dell wanting to “expand its data-storage and tech-services businesses,” that’s pretty boring. At the other end of the spectrum, there’s been some thought for awhile that Dell should look at buying Palm. Dell has reportedly been tinkering with releasing a new line of smart phones, but the company’s original concepts were apparently so lame that the carriers all told Dell to take a hike.

• Dell failing in the smartphone market certainly would not be an issue if they were to suddenly take possession of the Pre and webOS. They have $10B in cash, a bank account healthy enough to buy Palm at their current market cap of 1.85B. The acquisition would make sense for Palm and its major investor, Elevation Partners who invested an additional $100M in Palm at $3.25 per share in 2008. Riding the hype of the Palm Pre as well as post launch, Elevation Partners have already quadrupled their investment, and would certainly be willing to consider an offer if the stock were to sell at a premium price point (Palm now sits at $13. 43 per share). Palm stock will only conitnue to go up as everyone looks to Palm Pre being picked up by Verizon Wireless and their 80M subscribers.

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