Is Palm's Acquisition Inevitable?

I have a like-hate relationship with my Pre. The device is elegant as a phone; as a mobile Internet device it leaves a lot to be desired. Simple and obvious things have been left out: no voice diailing or searching, no virtual keyboard, no predictive text or auto correct and so on. But next to the iPhone it's in some ways the best device in the market.

It can't do everything that the Android devices can do but it's crisp and more "coherent" (integrated) in some ways than Android. But the Pre and the forthcoming Pixi seem destined to be overshadowed by the iPhone, Android and probably RIM's devices. Depending on how Palm's EU push and the Pixi do, the company may or may not be bait for an acquisition.

By whom? By Microsoft or Nokia, that's whom. 

Palm's market cap is more than $2 billion so it would take some number above that for either company to acquire it. But it would also take a big mea culpa and admission that Symbian/Maemo or Windows Mobile were essentially dead ends. Neither Microsoft (which plans to release WinMo 7 next year) nor Nokia is ready to do something like that just yet. 

Microsoft will need to introduce 7 and see what the response is. If 7 fails to ignite the imagination and sales then more drastic measures may be in order. By the same token if Nokia continues to see its position in the market deteriorate further it may similarly be time to make a big acquisition (Palm would also be a way to get back into the US market in a potentially big way). However the NAVTEQ acqusition, at $800 million, has so far failed to pay off or pay meaningful dividends for the company as far as I can tell. So the company may be reluctant to shell out huge money in another takeover bid. 

Palm itself will resist any takeover discussion until it's clear how the new WebOS and related devices are doing (at least a year from now). But right now at least they're not doing as well as Palm had hoped. At a lower price point, the Pixi might be the right device for the company, but the Pre has to be seen as something of a disappointment. 

If the Pixi doesn't take off, and there aren't any new devices up Palm's sleeve, and Nokia and Microsoft's fortunes don't improve significantly we may see one or both companies talking to Palm about taking it over. Right now an acquisition isn't inevitable (or even likely), a year from now it could be an entirely different story.