Does it make sense for Nokia to buy Palm?

Should one company that has trouble selling smartphones buy another?

A rumor that Nokia might purchase Palm shot the troubled smartphone company's shares up on Friday and reignited the debate: What should happen to Palm?

For the moment, nothing. With a $1.7 billion market cap, Palm seems awful pricey. It is hard to imagine anyone making such a huge investment for a company whose gloss is so rapidly wearing away.

On that basis, until something happens to lower that market cap--I think time will take care of it--Palm will remain independent.

Once the price goes down, Palm will have proven itself to be in such trouble that it may not be worth buying. Too expensive now could translate into not worth enough later. This is especially true if potential purchasers make smartphone progress in the meantime.

In that regard, Nokia needs to do something to make a real play in smartphones, but rumor aside, Palm is not it. Nokia already has its own smartphone OS, a Linux variant called Mameo, and could always head in the Android direction once it gives up on the idea of owning a smartphone ecosystem.

Nokia's new Mameo-based N900 may also be a better smartphone than the Palm Pre, another reason Nokia may want to continue on its own. However, there remains the annoying problem of generating developer interest, something Palm also lacks.

The biggest thing that speaks against Nokia buying Palm, besides the price, is the cost of integrating the two companies. Nokia is probably better off building Android phones for its high-end product while it tries to do a successful smartphone OS of its own.

Nokia will live to regret its inability to master smartphones before Apple and Google did. However, by not buying Palm it will be saving a boatload of money. Why add injury to insult?

A Palm buyout by Research In Motion is another possibility. RIM has faced problems turning its BlackBerry products into a family of smartphones. Its corporate customers have, however, been very understanding, thus giving the company breathing room.

Smartphones have been slow to catch-on in business, where integration with Microsoft Exchange technology often drives a purchase decision. BlackBerry remains the nearly universal corporate standard.

This also plays to RIM's benefit and against newcomers like the Droid. Apple seems to have only a passing interest in corporate purchasers.

You could reel off names of other potential Palm purchasers, a group that might include Samsung, Microsoft, Dell, and others. None of them, however, has a compelling reason to invest.

It is possible to imagine a company that has been successful in other consumer electronics or business products buying Palm as a way to get into the business. It is, however, much harder to imagine a company that loony.

If Nokia--or anyone else--is really considering a Palm buyout, they should think again.

David Coursey tweets as @techinciter and can be contacted via his Web site.

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David Coursey

PC World (US online)
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