IT giant Hewlett-Packard has emerged as the surprise buyer of Palm, agreeing to pay $1.2 billion in cash for the unprofitable handset firm.
HP will pay $5.70 for each Palm share, a 23% premium to Tuesday’s closing price.
But the WSJnotes the deal is “relatively inexpensive” for HP, in light of the fact that Palm’s share price has tumbled 53% in the past 12 months.
HP bought out Palm primarily for its well-liked WebOS, Shane Robison, chief strategy and technology officer at HP, toldFT.com.
HP has a tiny presence in the smartphone market, selling only Windows OS-enabled iPaq devices.
FT.com cites HP executives as hinting that the firm will incorporate the OS into further larger tablets to rival Apple’s iPad.
"[The deal] puts HP back in the game, but [Palm] is still wrought with problems," Maribel Lopez, an analyst at Lopez Research, told WSJ.
The deal will “probably anger” Microsoft, HP’s long-term partner in the PC business, Gartner analyst Ken Dulaney told FT.
Palm said on Wednesday it expected fourth quarter revenues to be in the region of $90-$100 million, down from earlier expectations of less than $150 million.
According to research firm IDC, Palm's smartphone market share for its Pre and Pixi devices declined to just 1.5% last year compared with 3.5% in 2005.
Other vendors HTC and Lenovo had also been rumoured to be in the running for Palm.
Earlier this month, HP completed its acquisition of 3Com for $2.7 billion in cash.