UNITED
STATES
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SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
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SCHEDULE 14A
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Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
o
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Filed by a Party other than the
Registrant
x
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Check the appropriate box:
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o
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Preliminary Proxy Statement
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o
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Confidential, for
Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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o
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Definitive Proxy Statement
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o
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Definitive Additional Materials
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x
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Soliciting Material Pursuant to
§240.14a-12
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PALM,
INC.
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(Name
of Registrant as Specified In Its Charter)
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HEWLETT-PACKARD
COMPANY
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(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the
appropriate box):
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x
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No fee required.
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o
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Fee computed on table below per
Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to
which transaction applies:
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(2)
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Aggregate number of securities to
which transaction applies:
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(3)
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Per unit price or other underlying
value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth
the amount on which the filing fee is calculated and state how it was
determined):
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(4)
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Proposed maximum aggregate value of
transaction:
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(5)
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Total fee paid:
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o
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Fee paid previously with preliminary
materials.
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o
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Check box if any part of the fee is
offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule and the date
of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration
Statement No.:
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Filing Party:
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(4)
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Date Filed:
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Important Information
Additional
information and where to find it
Palm
intends to file with the Securities and Exchange Commission a preliminary proxy
statement and a definitive proxy statement and other relevant materials in
connection with the acquisition. The definitive proxy statement will be sent or
given to the stockholders of Palm. Before making any voting or investment
decision with respect to the merger, investors and stockholders of Palm are
urged to read the proxy statement and the other relevant materials when they
become available because they will contain important information about the
acquisition. The proxy statement and other relevant materials (when they become
available), and any other documents filed by Palm with the SEC, may be obtained
free of charge at the SECs website at www.sec.gov, by going to Palms Investor
Relations page on its corporate website or by contacting Palms Investor
Relations department by email at teri.klein@palm.com, by phone at (408)
617-7000, or by mail at Palm, Inc., Investor Relations, 950 West Maude
Avenue, Sunnyvale, California 94085.
Participants
in the solicitation
Palm
and HP and their respective directors and executive officers may be deemed to
be participants in the solicitation of proxies from Palm stockholders in
connection with the acquisition. Information about HPs directors and executive
officers is set forth in HPs proxy statement on Schedule 14A filed with the
SEC on January 27, 2010 and HPs Annual Report on Form 10-K filed on December 17,
2009. Information about Palms directors and executive officers is set forth in
Palms proxy statement on Schedule 14A filed with the SEC on August 13,
2009. Additional information regarding the interests of participants in the
solicitation of proxies in connection with the merger will be included in the
proxy statement that Palm intends to file with the SEC.
Conference Call Transcript
Hewlett-Packard to Acquire Palm
Conference Call
Event Date/Time: Apr 28, 2010 / 09:00PM GMT
CORPORATE
PARTICIPANTS
Jim Burns
Hewlett-Packard
- VP, IR
Todd Bradley
Hewlett-Packard
- EVP, Personal Systems Group
CONFERENCE
CALL PARTICIPANTS
Richard Gardner
Citigroup
- Analyst
Katy Huberty
Morgan
Stanley - Analyst
Shannon Cross
Cross
Research - Analyst
Aaron Rakers
Stifel
Nicolaus - Analyst
Amit Daryanani
RBC Capital Markets - Analyst
Rod Hall
JPMorgan - Analyst
PRESENTATION
Operator
Good
day, ladies and gentlemen, and welcome to the Hewlett-Packard conference call
to discuss Hewlett-Packards acquisition of Palm. My name is Mike, and I will
be your coordinator today. As a reminder, todays call is being recorded for
replay purposes.
I
would now like to turn the call over to Mr. Jim Burns, Vice President of
Investor Relations. You may proceed.
Jim
Burns
- Hewlett-Packard
- VP, IR
Thank
you. Good afternoon and thank you all for attending this call on such short
notice. We are very excited today to announce that Hewlett-Packard and Palm
have reached a definitive agreement for Hewlett-Packard to purchase Palm at a price
of $5.70 per share, giving the transaction a total enterprise value of $1.2
billion.
2
After
I give you a brief overview of the terms of the deal, Todd Bradley, Executive
Vice President of HPs Personal Systems Group, will discuss the strategic
benefits of the transaction. We will then conduct a brief Q&A session.
Since
we are in quiet period, we will not be taking any questions that are not
specifically related to the definitive agreement with Palm. Before we get into
the details of this agreement, I wanted to let you know that this call is being
webcast live, and a replay will be available shortly after the call. There is a
slide presentation accompanying this call that is available on the HP Investor
Relations website at HP.com.
Some
information provided during this call may include forward-looking statements
that are based on certain assumptions and are subject to a number of risks and
uncertainties, and actual future results may vary materially. In addition to
the slides posted on HPs Investor Relations website, information about the
transaction, its participants, and its risks is or will be included in the
respective SEC filings of HP and Palm.
Before
making any voting or investment decision with respect to the acquisition,
investors are urged to read Palms proxy statement and the other relevant
materials when they become available because they will contain important
information about the transaction.
So,
if you go to page three of the slide deck on the Web, it includes a brief
summary of the terms of the transaction. Under the terms of the merger
agreement, Palm stockholders will receive $5.70 for each share of Palm common
stock that they hold at the closing of the merger. The transaction is to be
financed with existing cash. The acquisition is subject to customary closing
conditions, including the receipt of domestic and foreign regulatory approvals
and the approval of Palm stockholders. The transaction is expected to close in
the third quarter of HPs fiscal 2010, and with that, I would like to turn the
call over to Todd Bradley.
Thank
you.
Todd
Bradley
-
Hewlett-Packard - EVP, Personal Systems Group
Thanks,
Jim. The market we are focused on, connected mobile devices, is large,
profitable and growing. It is driven fundamentally by our customers need to be
connected to the people, information and entertainment that matter most to
them. We believe that the acquisition of Palm is a transformational deal in the
connected mobility market, opening up opportunities for further profitable
growth by leveraging the unique strengths of Palm, along with the unique
strengths of HP.
Over
the past five years, HP has driven profitable growth in our PC business through
a strategy of building global scale and delivering a superior customer
experience. While we see tremendous opportunities in the market to continue to
leverage our scale and capture the efficiencies that brings, todays
announcement is very much about how HP will provide our customers with a great
experience as they increasingly live their lives online for work,
entertainment, and everything in between.
In
acquiring Palm, HP dramatically accelerates the assets needed to deliver
compelling connected mobile experiences. Palms world-class technology, coupled
with HPs scale and financial strength, will accelerate our strategy within the
connected mobile device market.
Please
turn to slide five, if you will. This market presents a significant opportunity
for profitable growth. The smartphone market alone is over $100 billion and
growing over 20%. We see further opportunities beyond smart phones into
additional connected mobile form factors. We anticipate that with the webOS we
will be able to aggressively deploy an integrated platform that will allow HP
to own the entire customer experience, to effectively nurture and grow the
developer community, and to provide a rich, valued experience for our
customers. With Palm HP acquires a strong operating system to deliver a unique
customer experience in applications to over 2000 apps and growing, a platform
to deliver mobile cloud-based services, and an opportunity to drive preference
in the market among consumers.
Turning
to slide six, you can see that with Palm and HP each entity brings unique
assets and advantages that we expect to contribute to a winning combination. At
the foundation of both companies is a deep expertise in mobility, a culture of
innovation and strong carrier relationships. Two Silicon Valley-based
technology companies with a passion for innovation.
Palm
has developed a world-class mobile operating system and platform. The
integrated user interface they have architected and implemented delivers an
incredible experience from true multitasking on the device to a rich and
growing set of applications. Behind this technology is a valuable IP portfolio
including cloud-based assets which will advantage HP competitively. And behind
that IP is a deep bench of engineering talent led by a strong and experienced
management team.
3
Palm
brings all of this to HP, the right operating environment, a valuable IP
portfolio, and the people who know how to drive innovation that matters to
customers. HP brings to the table both the financial strength and the
commitment to further invest to accelerate profitable growth in the connected
mobile device market. We intend to invest heavily in product development and go
to market to drive this business aggressively.
HP
has built a position of unique strength through our scale and global reach. One
out of five PCs shipped in over 170 countries worldwide comes from HP. That is
about two PCs per second. This scale provides a foundation of flexibility, cost
efficiency and reach, which is unique in the industry. And with Palm, HP
expects to leverage its scale and global reach to extend the webOS experience
to more customers in more countries and across more products than Palm could do
on its own.
If
you turn to slide seven, you see that webOS was built as a true mobile platform.
With the Web at its core, it enables significant scalability, ease of
application development, and portability to multiple devices. The environment
performs the way you would want and expect a personal connected device to
operate with application multitasking, integrated personal information, and Web
services and an intuitive gesture interface. With more than 2000 applications
and growing, this platform and the Palm developer program are gaining momentum.
With HP, given the financial commitment we intend to make to this operating
environment, we expect this pace to accelerate.
Furthermore,
this platform enables cloud-based services such as over the air updates, online
backup and messaging services.
Turning
to slide eight, the response to the webOS in the analyst and tech media
communities has been resoundingly positive. These comments reflect more than
just kudos for a great product. They underscore the deep value of an integrated
solution that Palm has architected. With HPs additional investments and
commitment to this ecosystem, we will realize the full potential of this
integrated solution.
Finally,
please turn to slide nine. In conclusion, we see the acquisition of Palm as a
strategic and financially attractive opportunity. It accelerates HPs strategy
in a profitable and growing market category. Together HP and Palm will make a
powerful combination. With our long histories in Silicon Valley, our values and
vision are consistent, and our strengths are complementary. Palm provides HP
with the opportunity to move forward with world-class technology and an
integrated customer experience. Coupled with our scale, global reach and
investments in the ecosystem, we expect we will see solid growth. We are
excited about accelerating our capability to provide our customers with
compelling connected mobile experiences.
Jim,
I believe we will now open for questions.
Jim
Burns
-
Hewlett-Packard - VP, IR
Thanks.
Operator, we will take our first question, please.
QUESTION
AND ANSWER
Operator
(Operator
Instructions). Richard Gardner, Citigroup.
Richard
Gardner
- Citigroup
- Analyst
Well,
I guess the big picture question is why acquire your own operating environment
as opposed to simply building products based on Android, which seems to have a
tremendous amount of momentum in the marketplace and a much bigger development
community today?
And
then secondarily, I was hoping you could touch on dilution/accretion from the
deal and any cost synergy opportunities.
Todd
Bradley
-
Hewlett-Packard - EVP, Personal Systems Group
I
will start on the strategic point, and I will let Jim address the financial
questions.
4
Look,
we believe several things. First, our breadth of products between smartphones,
slates and potentially netbooks represents an enormous opportunity to our
customers. We believe that this is a very, very early stage market. I think the
developer community will very aggressively as we invest and provide support
begin to develop that suite of applications for webOS that will make it even
more compelling than it is today. At the same time we clearly believe in choice
and why you did not ask we intend to continue to be a strategic partner for
Microsoft. They are a huge piece of our business today and will continue to be
so, and we believe there is a unique opportunity with Palm to create an HP
experience across these connected products.
Jim
Burns
-
Hewlett-Packard - VP, IR
That
is great, Todd, and I will just add onto your commentary around accretion/dilution.
So we assume we are assuming this deal is going to close in our fiscal Q3,
probably towards the end of the fiscal Q3. That would put our modeling at
probably a few cents of dilution in the second half of the year.
Next
year you mentioned synergies. We are going to leverage our scale to improve
certainly the cost structure of the products, given the procurement leverage
that we have, etc., and the scale advantages we have. We also see growth
synergies with the business, too. At the same time, we are going to be, as Todd
mentioned earlier, putting more investments into the business, too. So when you
net all that stuff together, I think you will see in the grand scheme of things
pretty mild dilution in 2011 and accretion beyond 2011.
Operator
Katy
Huberty, Morgan Stanley.
Katy
Huberty
- Morgan
Stanley - Analyst
Yes,
thanks. Good afternoon. Todd, what is the timeline to evolve webOS to run on HP
hardware and specifically on different form factors with larger screens? And
then Jim, maybe if you could just comment whether there is a breakup fee
associated with the deal?
Todd
Bradley
-
Hewlett-Packard - EVP, Personal Systems Group
Yes,
so, first, we need to get the transaction closed before we get to talking about
timelines. Obviously, as part of due diligence, we ensure the capability to
create these products, but we have not announced any specific timelines at this
point. And Jim will take the other part of your question.
Jim
Burns
-
Hewlett-Packard - VP, IR
Yes,
we are not going to get into the details on the breakup fee stuff. All that we
will have proxy information and other SEC filings that will have all the
details about the deal that we are prepared to disclose.
Operator
Shannon
Cross, Cross Research.
Shannon
Cross
- Cross
Research - Analyst
Todd,
can you talk a little bit about the competitive landscape? Where you see the
devices that are running Palm OS competing, and is it consumer first and then
maybe more into corporate, or how should we think about the positioning of the
OS at least in the next couple of years?
5
Todd
Bradley
-
Hewlett-Packard - EVP, Personal Systems Group
I
think you have to break it up almost among the product categories. While Palm
currently has the Pre and Pixi smartphones, we see that as one space that right
now is very consumer-oriented, and we will look at how we leverage our both
retail and commercial channels to broaden the distribution of that those set
of products. I think the tablet/slate products are such new markets, we see
opportunities broadly for consumers, but at the same time, having just finished
up our partner conference, enormous interest on behalf of channel partners with
specific vertical deployments in things like healthcare and education. So I
think you will see these products deployed in both markets or both segments,
consumer and commercial, and again, we will talk about timelines when we get
closer to a completion.
Shannon
Cross
- Cross
Research - Analyst
Okay.
And then just one follow-up question for Jim. You list the experience in your
team, and clearly Jon and others are good. How would you lock them in, or is
there anything are they can we assume that they are locked in for at least
a period of time?
Jim
Burns
- Hewlett-Packard
- VP, IR
We
have a significant retention program that we put in place as part of the deal.
Todd
Bradley
-
Hewlett-Packard - EVP, Personal Systems Group
Look,
I think I will characterize for Jon, as we have had pretty specific
discussions, he is very excited about staying and building out actually
executing his vision for the webOS into a broader market, and I think HP brings
those capabilities to him to do that. And I think it is fair to say that his
team is excited as well.
Operator
Aaron Rakers, Stifel Nicolaus.
Aaron
Rakers
- Stifel
Nicolaus - Analyst
I
guess first question and a quick follow-up. The first question, I know that you
had referenced leveraging your two strategic positions within the carrier
market or the service provider market. I think it would be helpful to
understand what HP if you could characterize HPs positioning at the carrier
level and how you expect to solidify what looks to be some challenges that Palm
has had over the last couple of quarters.
Todd
Bradley
- Hewlett-Packard
- EVP, Personal Systems Group
Well,
I think let me try this a couple of ways. First, I think it is fair to say
that the investments we intend to make in our go-to-market capabilities once we
close the transaction will be very important. Our investments we intend to make
in building out the application developer capabilities for the platform will be
very, very important.
Today
HP provides the infrastructure for, I think, eight of the 10 top carriers in
the world. And as we built our plans, our execution plans, we focused on
leveraging several large carriers instead of large numbers of small carriers.
So we think that leverage and that focus will provide a very significant growth
platform for these products as we go forward.
Aaron
Rakers
- Stifel
Nicolaus - Analyst
And
then a follow-up, I just want to be clear. You had mentioned obviously the deal
closes in fiscal third quarter. I think you said slightly dilutive in the
second half of the year, but I think it also followed up with saying it would
be mildly dilutive for fiscal 2011. Did I hear that right?
Jim
Burns
-
Hewlett-Packard - VP, IR
Yes,
you did.
6
Aaron
Rakers
- Stifel
Nicolaus - Analyst
Mildly
a couple of pennies or not even that?
Jim
Burns
-
Hewlett-Packard - VP, IR
Well,
the grand scheme of the earnings power of the company it is not significant is
what I would say. We are not going to get into putting penny figures on the
thing. The synergies do start kicking in in the first full year of fiscal year
2011. But Palm is operating at an operating loss right now, so we have got work
to do. But it will be mild. Ill just leave it there.
Operator
Amit
Daryanani, RBC Capital Markets.
Amit
Daryanani
- RBC
Capital Markets - Analyst
A
couple of questions. First off, could you talk about how you intend to keep the
Palm R&D and the engineering team within HP? Do they have retentions as
well? And do we intend to keep them separate, or do you expect to integrate
that with the broader HP (inaudible) offering?
Todd
Bradley
-
Hewlett-Packard - EVP, Personal Systems Group
Well,
we intend to operate it as a business unit, which is in line with the way we
are structured today. I think as I said earlier Jon Rubinstein is very excited
about the opportunity HP represents to build out the platform, and I think it
is fair to say his leadership team is as well.
Amit
Daryanani
- RBC
Capital Markets - Analyst
And
then how should we think about the existing, the iPAQ offering that HP has, do
you expect to keep that on the Windows mobile platform the way it is, and then
Palm would run on webOS, or would it all just be would everything get run on
webOS down the road?
Todd
Bradley
-
Hewlett-Packard - EVP, Personal Systems Group
We
have not made the specific roadmap announcements yet. As we get closer to or as
we close the transaction, we will be much more granular in how we communicate
that.
Why
dont we take one more question, please?
Operator
Rod
Hall, JPMorgan.
Rod
Hall
- JPMorgan -
Analyst
Im
going to be asking for Mark Moskowitz as well who covers HP. He is out of
office at the moment. One of the main questions we have got is we have seen
Apple succeeding as a content platform in addition to the hardware platform
that they are providing. So they are doing a lot of content aggregation. Do you
intend to get into that side of the business to move the platform forward? Can
you just talk a little bit about what your content strategy might be?
7
Todd
Bradley
-
Hewlett-Packard - EVP, Personal Systems Group
Our
focus is to provide connected devices that enable people to safely and
seamlessly connect to that information that is important to them, be that
entertainment or work or personal data. So I dont think we are content
creators, but we are access providers.
Rod
Hall
- JPMorgan -
Analyst
So
does that mean you would look to do deals with music companies and video
companies and things like that, kind of along the lines of what we have seen Apple
do?
Todd
Bradley
-
Hewlett-Packard - EVP, Personal Systems Group
Well,
look, we are not going to get into the specifics of how we will execute the
strategy that we have laid out for the acquisition. I think we will do more of
that as we get the transaction closed.
Rod
Hall
- JPMorgan -
Analyst
Okay
and then just one follow-up on R&D. You talked about how you are going to
approach that, but we are modeling about $190 million a year of R&D at
Palm. Do you think that is adequate? Is that roughly what you would see going
forward, or do you think it needs to be increased to move the platform to the
next level?
Jim
Burns
-
Hewlett-Packard - VP, IR
We
are going to be increasing that. Were going to be increasing the sales and
marketing also. So we are going to be taking this platform, which today exists
in smartphones and taking it much broader than that. We are going to be taking
putting more money behind the sales and marketing commitment of it, and so we
are definitely going to be investing heavily in this business in the next year.
I
will turn it here to Todd now for the close.
Todd
Bradley
-
Hewlett-Packard - EVP, Personal Systems Group
Okay.
Thanks, Jim, and thanks all of you for joining us today.
In
closing, I would just like to say Im very excited about this transformational
deal in the connected mobile device market. We are really looking forward to
closing the acquisition. We strongly believe that HPs scale, global reach and
financial strength, coupled with the world-class technology from Palm, will be
a winning combination for our customers, partners, shareholders and our
employees.
And
with that, we will now conclude todays call. Thank you very much.
Operator
Ladies
and gentlemen, thank you for your participation in todays conference call.
That concludes todays presentation. You may now disconnect. Have a wonderful
day.
8
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