HP's $1.2B Palm Acquisition and Its 49-Day Demise - Article Recap

A recap of Phil McKinney's article on how he convinced HP's board to buy Palm for $1.2B for its WebOS technology, only to watch leadership kill the project within 49 days of launch.

  • Context and rationale: In 2010, HP was concerned about the future of the PC market as tablets and smartphones became prominent, needing to quickly develop mobile platform capabilities.
  • Palm's WebOS breakthrough: Palm had WebOS—featuring true multitasking, elegant UI, and robust technical architecture—unlike rivals at the time.
  • Technical due diligence: As HP's CTO, Phil McKinney spent time with Palm engineers, thoroughly reviewing the codebase and platform, finding the technology and talent highly promising.
  • Strategic case to board: McKinney presented to HP's board and CEO Mark Hurd that the acquisition wasn't just buying a failing phone company, but making a strategic leap into the future of computing platforms.
  • Acquisition completed: HP agreed and completed the $1.2B purchase in April 2010, acquiring WebOS technology and Palm's engineering team.
  • Integration plans: After acquisition, McKinney helped integrate Palm within HP, planning to transition WebOS to tablets and PCs, exploring apps for HP printers.
  • Leveraging HP's scale: The strategy was to build synergies between Palm's innovation and HP's massive scale and resources.
  • Sudden leadership change: In August 2010, CEO Mark Hurd resigned and was replaced by Leo Apotheker from SAP, who had a dramatically different vision.
  • Strategic reversal: Apotheker wanted to shift HP from hardware to software and services, viewing WebOS as an obstacle to his new strategy rather than an asset.
  • Apotheker's perspective: The new CEO saw little value in expanding HP's hardware businesses and considered WebOS incompatible with his vision.
  • Hospitalization timing: McKinney was hospitalized for eight weeks due to surgery around the time HP was preparing to launch the TouchPad tablet.
  • Helpless observation: While recovering, he watched the integration and vision he championed being ignored and mismanaged from the sidelines.
  • Rushed launch: The TouchPad launch was rushed, priced alongside the iPad but lacking the marketing and app ecosystem to make it viable.
  • 49-day death: Within 49 days of the TouchPad launch, HP abruptly killed the WebOS project and Palm hardware entirely.
  • Personal toll: McKinney shares the frustration and responsibility he felt being unable to intervene during this critical period.
  • Organizational change impact: The story illustrates how organizational changes (new CEO, changed priorities) can destroy even the most promising acquired innovations.
  • Lack of vision alignment: Even with solid technical and business analysis, misalignment of vision between leadership can doom strategic acquisitions.
  • Predictable patterns: The article shows how "smart" executives can kill breakthrough technology through misguided thinking—particularly failing to support and integrate innovation.
  • Premature strategy shifts: Changing strategic direction too quickly after major acquisitions prevents proper integration and realization of value.
  • Case study value: The Palm/WebOS story serves as a framework for understanding why great technology can fail in large companies due to leadership and organizational factors.
  • Continued advocacy: Despite the failure, McKinney remains an advocate for HP and for pursuing strategic innovation, using this as a learning experience.

The full article is available here.