On Wednesday HP announced its plans to buy out Palm for $1.2 billion, or at a price of $5.70 per share of Palm common stock.  This is big news, and it’s quite shocking.  Palm’s existance takes the shape of a rollercoaster ride.  Since its inception in 1996, Palm introduced the world to some of the first personal device assistants (PDAs) with the Palm Pilot, the Handspring Treo, Treo and Centro smartphones, and the failed experiment that was Folio.  After nearly facing its demise, Jon Rubinstein (who helped invent the iPod) left Apple to help ressurect Palm.  And so he replaced Ed Colligan as CEO, created a new mobile operating system called WebOS, and pushed out two new smartphones, the Palm Pre and Palm Pixi.  Thanks to a downright scary marketing campaign (watch this commercial if you dare) and tough business decisions (making the Pre exclusive to Sprint), Palm’s stock took another nosedive and rumors of a buyout quickly surfaced.  Tech companies like HTC and Lenovo sat at the top of analyst’s lists as possible companies to gobble up Palm.  And then, all of a sudden, HP  literally came out of no where to seal the deal.  And look at that, we’ve made it to present day.

HP will officially acquire Palm during HP’s third fiscal quarter, or by July 31.  So what does this mean for the two entities?  Right now this is what Palm’s got: the Pre, the Pixi, and most important to HP, WebOS.  HP’s executive VP Todd Bradley says, “Palm’s innovative operating system provides an ideal platform to expand HP’s mobility strategy and create a unique HP experience spanning multiple mobile connected devices.”  Essentially, HP is going to take everything WebOS and run with it across a wide range of devices.  Which means you can plan to see it running on smartphones and potentially netbooks and tablets.  All this begs the question, what will become of the HP Slate now that WebOS is on the table?  Only time will tell.

It’s been confirmed that Palm CEO Jon Rubinstein will stay onboard with the majority of senior team members at the company.  Also, the current Palm hardware roadmap has not been affected by the merger.  All signs point a happy marrige.  Says Rubinstein: “We look forward to working with HP to continue to deliver industry-leading mobile experiences to our customers and business partners.”  He added, “I don’t think HP would do this unless they were willing to make the kind of investment necessary to win.”  What’s interesting here, though, is that HP signed up to be an initial key partner with Microsoft for Windows Phone 7.  Also, HP already has their less-than-successful line of iPaq smartphones.  Will Palm become iPaq or stay Palm?  All of these questions will likely be answered sometime between now and July.  All in all, the acquisition is a big win for consumers (and Palm, really) as it will breath new life into the emerging WebOS platform and introduce new hardware on a whole new scale of innovation.

Look after the break for the official PR and a letter written by Rubenstein to his company.

[Via Engadget, here & here; WSJ]

PALO ALTO, Calif. & SUNNYVALE, Calif.–(BUSINESS WIRE)–HP (NYSE: HPQ – News) and Palm, Inc. (NASDAQ: PALM – News) today announced that they have entered into a definitive agreement under which HP will purchase Palm, a provider of smartphones powered by the Palm webOS mobile operating system, at a price of $5.70 per share of Palm common stock in cash or an enterprise value of approximately $1.2 billion. The transaction has been approved by the HP and Palm boards of directors.

The combination of HP’s global scale and financial strength with Palm’s unparalleled webOS platform will enhance HP’s ability to participate more aggressively in the fast-growing, highly profitable smartphone and connected mobile device markets. Palm’s unique webOS will allow HP to take advantage of features such as true multitasking and always up-to-date information sharing across applications.

“Palm’s innovative operating system provides an ideal platform to expand HP’s mobility strategy and create a unique HP experience spanning multiple mobile connected devices,” said Todd Bradley, executive vice president, Personal Systems Group, HP. “And, Palm possesses significant IP assets and has a highly skilled team. The smartphone market is large, profitable and rapidly growing, and companies that can provide an integrated device and experience command a higher share. Advances in mobility are offering significant opportunities, and HP intends to be a leader in this market.”

“We’re thrilled by HP’s vote of confidence in Palm’s technological leadership, which delivered Palm webOS and iconic products such as the Palm Pre. HP’s longstanding culture of innovation, scale and global operating resources make it the perfect partner to rapidly accelerate the growth of webOS,” said Jon Rubinstein, chairman and chief executive officer, Palm. “We look forward to working with HP to continue to deliver industry-leading mobile experiences to our customers and business partners.”

Under the terms of the merger agreement, Palm stockholders will receive $5.70 in cash for each share of Palm common stock that they hold at the closing of the merger. The merger consideration takes into account the updated guidance and other financial information being released by Palm this afternoon. The acquisition is subject to customary closing conditions, including the receipt of domestic and foreign regulatory approvals and the approval of Palm’s stockholders. The transaction is expected to close during HP’s third fiscal quarter ending July 31, 2010.

Palm’s current chairman and CEO, Jon Rubinstein, is expected to remain with the company.

Rubenstein’s letter to company:

Team,

Over the past three years, we have made remarkable progress transforming Palm. We returned to our innovative roots and delivered some of the best mobile experiences on the market. Today, we are taking a huge step forward in accelerating that strategy with the announcement of a merger with HP.

I am very excited about the potential of this merger (and not only because I started my career there). HP recognizes the value of our platform, our IP and our people, and that is all a result of your hard work. In a very short period of time, we’ve amassed a world-class team, brought webOS to market with widespread acclaim, launched four new devices and launched in eight countries. In short, we have delivered on our original plan.

HP is a world-class company which brings the extensive resources necessary to scale the Palm webOS platform. Together, Palm and HP share a history of innovation and technology leadership, and I look forward to working with them to accelerate the development and adoption of Palm webOS.

There are many decisions to be made and questions to be answered in the coming months as we turn to completing a successful integration. During this process, we must remain laser focused on our priorities – increasing sell through and customer satisfaction, and continuing to work on our innovative product roadmap.

I’m sure you’d like to hear more about this announcement, and perhaps ask some questions, so please join me in the multi-purpose room at 4:30p.m. today for an all hands meeting.

One last public service announcement – as you might expect, this development may generate considerable interest from the media and shareholder community. If you are contacted by a reporter, please refer them to Lynn Fox at XXXX, and if you are contacted by an investor or financial analyst, please refer them to Teri Klein at XXXXX.

Thanks again for all your hard work, and go Palm and HP!!

jon