HP Buys Palm: If Apple can do it, why not HP?

Hewlett-Packard (NYSE:HPQ) launched itself into the wireless market in a big way today, agreeing to buy Palm (NASDAQ:PALM), the creator of what was arguably the world’s first smartphone operating system for $1.2 billion.

In doing so HP is following Apple (NASDAQ:AAPL) into the potentially enormous smartphone market, though it’s taking an entirely different route. Rather than develop a hardware platform and operating system from scratch, HP is buying an established smartphone vendor—one with a small but intensely loyal following. But while Palm’s following was centered in the US, HP has worldwide brand recognition and distribution. It might be betting it can succeed with Palm’s platform on a global scale where the much smaller company could not.

HP likely won’t be the last computer maker to make such a move. Lenovo was reportedly also interested in Palm, and several laptop makers have already made their initial forays into the handheld computer/smartphone market. The RF expertise inherent in phone design used to be a huge barrier for entry into the phone market by consumer device and computer makers. But such companies have found they can contract out for that expertise or turn to increasingly sophisticated embedded module market to provide ready-made wireless solutions. Ericsson (NASDAQ:ERIC) vice president for mobile broadband modules Mats Norin, for instance, predicts that it’s only a matter of time before embedded radio suppliers create the first smartphone modules.

What’s more, the data-centric sophistication of the smartphone has moved it away from handset vendors’ core of expertise and toward that of the computing companies. It’s no coincidence that Intel (NASDAQ:INTC) is moving aggressive into the mobile computing space, challenging the incumbent mobile silicon makers like Qualcomm (NASDAQ:QCOM) and Texas Instruments (NYSE:TXN).

In its first venture into the smartphone arena, Apple turned the industry on its head and arguably moved the smartphone into the mass market, something that Nokia (NYSE:NOK), Research in Motion (NASDAQ:RIMM) and Palm had failed to do. Now Google (NASDAQ:GOOG) is shaking up the market with its Android operating system if not with its own Nexus 1 smartphone.

HP, however, can distinguish itself from the other computer makers and consumer device manufacturers that follow it into the smartphone market because it now owns its own operating system. As Lenovo and Dell make their smartphone moves they’ll either have to sink huge amounts of time and investment into developing their own platforms—further fragmenting the market—or rely on one of the established platforms out there such as Android, Microsoft’s (NASDAQ:MSFT) Windows Mobile or Symbian.

Unless a massive merger between RIM and one of the laptop makers is in the cards, Apple and HP will likely be the only two computer makers with their own in-house mobile OS software. That could be an advantage for HP, or it could be a limitation.

With Palm, HP can build unique devices with unique functions to differentiate itself from competitors relying on common licensed platforms. But with so much fragmentation in the market, consumers and businesses are likely to coalesce around a few platforms. And unless HP can build up Palm into much more popular platform than it is today, it well may have trouble making the case for its OS over Android or BlackBerry.