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HP's Bitfone Fix

Dan Jones
LR Mobile News Analysis
Dan Jones, Mobile Editor
12/21/2006

HP Inc. (NYSE: HPQ)'s plan to buy over-the-air (OTA) software firm Bitfone Corp. will help the IT firm move closer to being a one-stop shop for enterprise device connectivity and could be yet more bad news for gadget rival Palm Inc.

HP said today that it will buy Bitfone for an undisclosed sum in a deal that is expected to close in 2007. Laguna Niguel, Calif.-based Bitfone is a six-year old company that develops software that allows wireless operators and enterprises to update devices wirelessly with software upgrades or perform remote diagnostics on broken gizmos. HP says that it wants specifically to use the firm's technology for enterprise applications.

The HP buyout is the latest in a series of enterprise wireless software buyouts in the messaging and management arena. For instance, HP's rivals Motorola Inc. (NYSE: MOT) and Nokia Corp. (NYSE: NOK) have bought Good Technology Inc. and IntelliSync recently (See Motorola Gets Good and Nokia to Buy Intellisync.) "I think this is a smart move on HP's part -- assuming they did not go too high on the purchase price," says Jack Gold, analyst at J.Gold Associates. "In order for HP to compete in the enterprise space, they need a complete solution -- device and management, along with middleware software."

HP already has Windows-powered wireless devices, which have a small share of the enterprise handheld market. The company also works with Microsoft Corp. (Nasdaq: MSFT) for connectivity for the devices through Exchange.

"I see this as a necessary competitive step for HP, and one that is targeted at enhancing their share of the smartphone in the enterprise market," says Gold.

Todd Kort, analyst at Gartner Inc. , isn't so convinced, noting that HP is getting spanked by RIM in the market. "HP's share of the worldwide enterprise mobile device -- PDA and smartphone -- market has been declining and will be in the range of 5 percent to 10 percent in 2006... BlackBerries purchased by enterprises in 2006 outnumber iPAQs by a ratio of about 6 to 1." Whatever it means for HP, however, it is definitely more bad news for Palm as its rivals expand their device-related software portfolio, often snapping up companies that the handheld-maker called partners.

"This does leave Palm out in the cold, so to speak, as they don't have a software solution, relying on third-party providers, several of whom are now part of a competitor," notes Gold.

Motorola also invested cash in Bitfone, which boasts an impressive list of vendor and carrier customers. (See Funding: Startup Roundup, Moto Gives Bitfone More Cash, and Bitfone Gets Orange Cash.) Bitfone's rivals in the OTA niche include InnoPath Software Inc. , Red Bend Software , and SmartTrust AB .

The companies aren't saying what HP is paying for its acquisition. It is worth noting, however, that Bitfone picked up at least $60 million in funding over the years.

— Dan Jones, Site Editor, Unstrung

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