RealTime IT News

Dell Ready to Deal for Palm?

There has been a peculiar habit among the press to almost wish for a major tech firm to make a big acquisition. In recent months, the media has noticed the large cash hordes of Cisco, Apple and now Dell and wondered aloud what kind of expensive acquisition they could make.

So far much of the media speculation – like Apple (NASDAQ: AAPL) supposedly buying game developer Electronic Arts (NASDAQ: ERTS) or Cisco (NASDAQ: CSCO) supposedly buying EMC (NYSE: EMC) – hasn't met reality.

In the case of Dell (NASDAQ: DELL), the speculation came from the horse's mouth, sort of, by way of a report that a source close to CEO Michael Dell said he hopes to acquire a "significant-sized company" in coming months. The article then went on to say Chief Financial Officer Brian Gladden has expressed an interest in acquiring firms in the data storage and tech-services businesses.

So how did the rumors settle on Dell acquiring Palm? It started back in March with a blog posting on Barron's, which discussed a research note from Kaufman Bros. analyst Shaw Wu that Dell's attempt to make a mobile phone was met with indifference from carriers.

Barron's writer Eric Savitz then speculated out loud (by his own admission) that perhaps Dell should just purchase Palm (NASDAQ: PALM), which had seen its fortunes shrivel in recent years, making it quite affordable, but was sitting on a potential winner with its well-received Palm Pre smart phone.

Fast-forward three months, and now Collins Stewart analyst Ashok Kumar sent out a research note that shows Savitz was on to something, although does not mention him by name, and theorizes the merger "will be born of mutual necessity."

Kumar thinks this would allow newly-appointed Palm CEO (and former Apple executive) Jon Rubenstein a chance to run Dell and let Michael Dell return to the chairman's job he held before returning CEO two years ago.

But Ken Dulaney, research vice president at Gartner, thinks otherwise. "Palm just promoted Rubenstein and I don’t think he would have taken the job if he was immediately going to be sold to Dell. He wants to build his own environment. So I don’t think this is likely," he said in an e-mail to InternetNews.com.

Does Dell need an iPhone killer?

Palm could certainly use the help. The Pre, the latest smartphone to be dubbed an "iPhone killer," entered the market last week with more of a burp than a bang. J.P. Morgan analyst Paul Coster said in a research note that Palm launched the much-hyped Pre with 100,000 units, selling out almost immediately.

Sprint, Palm's sole carrier, received on average 40 units per store while Best Buy got just two to four units. When Apple launches the iPhone 3G S on Wednesday, it will deliver considerably more than 100,000 units to retail and AT&T outlets around the entire United States.

Dulaney believes former Motorola executive Ron Garriques, who now heads consumer electronics at Dell, is the reason for the mobile phone talk from a computer company. "He probably would like to run another cell phone business. But times have changed. Those he would go up against are much bigger and stronger. Dell really needs to find more retail distribution for its notebooks and as such I would see the cell phone channel as a more likely place for them to be with notebooks," he said.

Dell declined to comment on the rumors, while Palm did not return a request for comment.

Three million reasons to tweet

In other Dell news, the company announced it's chalked up $3 million in sales from Twitter followers who clicked through its posts to deals on its Web sites. The company discussed the sales on its Direct2Dell blog.

Three million in sales is nothing for a company that did $12.3 billion in sales last quarter. But it does prove that someone has figured out how to use the widely-hyped network for something other than 140 characters (or less) of instantly forgotten chatter.