TSIF (99.96)

HPQ Rescues PALM.....my palms were sweating on this one!!!

April 28, 2010 – Comments (4) | RELATED TICKERS: HPQ , PALM.DL

On April 11th I blogged about the chances of PALM getting bought out.  Actually, I thought any move would be brief and that various buyers were in final stages of bidding. As time passed, I added to my blog commends and pitch on PALM that I was hopeful for a $6 to $7 buyout price of PALM with the bidders most interested in PALM's OS and Brand recognition.  I believe the straight jacket can come off and I can work on the macaroni deco art that I owe UltraLong for other digressions!

I became more hesitant as the last week or so passed and almost sold my $4 CALL on PALM at a break even price.  I'm surprised today that HP is the winner.  I felt an Asian company would value PALM more for the name, OS, and leverage their cheaper manufacturing to get a little more margin from PALM.  The Buy Out price of $5.70 is a little confusing. I was basing my $6 to $7 on slightly more than a $1.2 Billion sell price. The $1.2 Billion seems to be correct, but either my math was off, or other debt is being calculated differently as the news reports show the $1.2 Billion as $5.70.

Hopefully the move will retain Palm's core engineering team, some of which were starting to drift away until PALM offered some incentives to hang out.  HP did have a void here in the cell phone space. Rather than try to fill it from scratch, this buyout does seem to be a good play for them. As expected HPQ's stock is down about 1% on the announcement.

There will be many pundits who feel that PALM sold out too cheaply. Some will be expecting a higher offer now that this one is on the table. I don't expect a higher offer. I'm certain Goldman Sachs played everyone round robin as long as they were in play.  Some companies may have felt they could get PALM at a discount by waiting, but I'm confident GS took care of those illusions.

I believe this is a done deal.   While I played it as a HIGH RISK, I'll be very glad for this to be over so my PALMS can stop sweating. I readily admit as the price dropped from $5.50 back to $4.60 the last few days, I was ready to run.

TSIF   The SKY is NOT Falling today. If you're a PALM shareholder you're probably relieved, but slightly disappointed at the premium. If you're a PALM employee who has been looking over your shoulder waiting for the hammer to drop, the sunlight probably feels a little bit warmer!