HP is starting to sound like the first year of the Obama Adminstration. They have their own version of fixing the economy, winning a war, and giving everybody health insurance -- it's beating Cisco with 3Com and then conquering the mobile-phone market with today's announcement that they'll buy Palm for $1.2B. Is HP biting off more than they can chew? Can't say we were right about Palm, or were we? HP did the deal at $1.2B. It surprises me. My premise was that paying over $1B for a company that is losing money and market share, with a negative book value, and $400B in debt is just slightly nutty, but what do we know. Apparently the HP CFO knows more than me. Wall Street objects of course, as they typically see big acquisitions as CEO ego-moves with the percentages of success against them. HP stock was selling off after hours. My guess is that a gaggle of beancounters gathered in the back rooms of some suite at a Four Seasons hotel, stocked up on Red Bull, and hammered out some numbers that said if you fired X% of the Palm staff, combine X+Y overseans manufacturing operations, squeezed the Palm marketing budget into HP's marketing budget, and had a vision for selling mobile handsets, you'd make the numbers work. Those magical operating synergies! Who knows, maybe if we make it to 2011 without five more international banking crises, the deal can make money. I doubt it, and that's why HP's stock is selling off after hours. Palm stock meanwhile, is up 25% to about $6 after-hours. But keep in mind the stock traded up to $6 just a few weeks ago based on the rumors, then it traded down. If you bought it at $4, good job. If you bought it at $5.75, boy that was a lot of risk to take make a little bit of money on a speculative event. This is obviously part of HP CEO Mark Hurd's campaign to enter every technology market on earth. He wanted into services, so he bought EDS. He wanted into networking, so he bought 3Com. He wants into mobile devices, so they buy Palm. Next thing you know he'll be buying Yahoo and selling you navigation systems for your car. Here's the problem: You're now taking on IBM, Cisco, Nokia, Motorola, Apple, and maybe even Google all at once? Good luck with that. It might be more sensible to focus on fixing the 3Com machine first, before you start making cracks about taking on Cisco, let alone entering the most crowded and rapidly changing market on earth: smartphones. Yes, I see the logic. Smartphones are growing faster than anything. But HP has a lot of work to do -- especially on the marketing side -- to take down Cisco. Now they're going to have their hands full with mobile. My biggest question is that as the industry starts adopting Google Inc.'s Android operating system, why do you want to acquire a proprietary smartphone platform that is at best, four or fifth in market share? “Palm’s innovative operating system provides an ideal platform to expand HP’s mobility strategy and create a unique HP experience spanning multiple mobile connected devices,” said Todd Bradley, executive vice president, Personal Systems Group, HP, in the press release. Yes, the vision is easy to see. The execution is an entirely different thing altogether. Good luck, HP, you'll need it.