Hewlett Packard to buy Palm for $1.2 billion

Hewlett-Packard has stepped in to buy the troubled smartphone maker Palm, announcing a $1.2 billion deal on Thursday that brings to an end the growing doubts over the future of the personal technology brand.

The deal will catapult HP, the world's largest tech company in terms of revenue, into the middle of the rapidly growing smartphone business in direct competition with a handful of other tech giants, including Apple, Google and Microsoft. HP said it would pay $5.70 a share in cash for the company, representing a 23 per cent premium over its closing stock price on Thursday. Palm's shares have fallen by three-quarters from their peak six months ago as the Silicon Valley-based company has failed to drum-up the sales it needed to convince Wall Street that it could remain an independent company. Shane Robison, chief strategy and technology officer at HP, said the company was making the purchase mainly to get its hands on Palm's Web OS operating system, which has won plaudits in the tech world since its launch early last year. HP executives also hinted that they would use the software in future for larger "tablet" computers to rival Apple's iPad.