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HPQ Rescues palms were sweating on this one!!!



April 28, 2010 – Comments (4) | RELATED TICKERS: HPQ , PALM.DL2

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!



4 Comments – Post Your Own

#1) On April 28, 2010 at 7:40 PM, dragonLZ (88.28) wrote:

As soon as I heard the news about PALM, I thought of you.

Very nice call. Congrats.

I'm very happy for you.

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#2) On April 29, 2010 at 11:24 AM, dare1182 (25.14) wrote:

Congrats..I wonder when will they take their shares back and give us our money..cuz I have some covered calsl on palm shares that dont expire til late this year....I hope soon : )

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#3) On April 29, 2010 at 11:38 AM, TSIF (99.97) wrote:

dare1182, with mine at $4.00 there wasn't much profit there, but I'll take it.  My calls weren't covered, so I'll probably hold them a few days and see if anything settles out. There is a slight chance another bidder might come along, but I seriously doubt it. There is always a chance this deal will fall apart and PALM will be starting all over again. This could happen if PALM presented a set of books completely contrary to reality and HP finds it.  I think this chance is RARE.l

AS far as actual shares, its more a game of taxes and whether you have anything else you want to invest in that might have more opportunity. Opportunity here, pending a higher offer is very unlikley.

From a tax perspective, if you're coming up on a year then holding changes the tax structure.  These things are usually settled in 2-3 months.

Good luck!



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#4) On April 29, 2010 at 2:29 PM, dare1182 (25.14) wrote:

Thanks alot for the advice

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