Palm: The Device Angle

A single hot device can help turn around the fortunes of the most ailing gadget maker. The most obvious recent example is how the 2004 launch of RAZR helped Motorola Inc. (NYSE: MOT) rebound.

This is one aspect that hasn't been fully explored in all the chatter about the potential sale of Palm Inc. , unleashed when Unstrung revealed that the company is on the block. (See Palm Action Heats Up and Palm's in Play .) Palm's founder and former CTO, Jeff Hawkins, is known to be working on a new gizmo that some are hoping will prove to be a hit for the firm.

There's little solid detail on what exactly Hawkins has been working on. We don't have any technical specifications, launch date, or even a code name.

What is known is that Hawkins founded a company called Numenta back in 2005 to design computers based on his theories about how the human brain works. Ever since, he has hinted he was working on a new class of mobile device that uses some of this development work. Coming from the father of the Palm Pilot, this is enough to make some people very excited. Palm-related blogs and gossip sites have been speculating recently that the new project could be unveiled soon.

Palm hasn't yet responded to questions about Hawkins's work or potential new devices. "I suspect that very few Palm employees know anything about it... Palm would immediately fire anyone that leaked news about this," says Gartner Inc. analyst Todd Kort.

Nonetheless, analysts expect Palm would get first rights to license whatever Numenta comes up with. The two companies have close ties; Palm CEO Ed Colligan sits on Numenta's board

So how does this fit with the acquisition story? If Hawkins really has something new that will appeal to consumers, it could make Palm more attractive to potential buyers.

"It would not be surprising that if Hawkins’ new product is really interesting – and if Palm has the rights to it – that Palm may announce that they have been acquired by somebody at about the same time," comments Kort in an email.

"There are a couple of prominent Palm stockholders that have been publicly agitating Palm’s top management to get the company in shape to be sold. If somebody were to announce that they are acquiring Palm now and investors are still in the dark about the new product, then the acquirer’s stock could take a big hit because they might look rather foolish."

A new device would help explain why Nokia Corp. (NYSE: NOK), Dell Technologies (Nasdaq: DELL), and Microsoft Corp. (Nasdaq: MSFT) have been suggested as suitors for Palm, which on the surface appears to be a faded beauty in the gadget glamour parade.

As we've seen with the BlackBerry and iPhone, a hot phone can really capture the public's imagination and win the kind of coverage on TV, in print, and on the Internet that even a massive device maker couldn't drum up with the sneakiest of viral marketing campaigns. This attention frequently translates into revenues when earnings time comes around.

Would that be the only reason to buy Palm? No. The installed base and still-iconic brand could also be appealing. A new device could, however, be one factor that is not yet obvious in the back-and-forth discussions about whether Palm is an attractive acquisition target or not.

— Dan Jones, Site Editor, Unstrung

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