Should Apple buy Palm?

I think maybe so.

I just finished watching Palm's CES keynote where they unveiled the Pre and webOS, and I'm just blown away. This is some really innovative software- truly a generation beyond the current iPhone software. Check out the video- particularly chapters 4 through 8- to see what I'm referring to.

The Pre and webOS borrow heavily from the iPhone and its OS and grow upward from there. There is no doubt that this device never could have existed in its current form if not for the iPhone. To make matters more interesting, last week came news that Apple had successfully patented the multi-touch functionality used by the iPhone. Clearly, Apple and Palm are in for some serious negotiating, if not legal wrangling.

So, with the Pre and webOS we have a resurgent Palm that has come out of the gate with the first mobile platform to truly challenge the iPhone (though it's not shipping yet, and won't be for some time). Palm has been a major player in mobile technology for more than a decade, and for much of that time, they've had better technology and more marketable mobile information products than Apple (the Palm Pilot vs. the Newton, followed by a generation of advanced PDAs and smart phones before Apple entered the game).

The future of the mobile platform wars is difficult to predict, but for now, the major players are Apple, RIM (BlackBerry), and Google (Android). And now Palm, right up there with them and I would argue ahead of RIM and Google for now (though again, this is based purely on the demo and not shipping units). Microsoft (Windows Mobile) and Nokia (Symbian) are off on the sidelines, not currently top-tier competitors, though not to be completely overlooked.

This is a healthy ecosystem for competition and one in which the iPhone will need to innovate dramatically in order to retain the mindshare and growing marketshare momentum it currently possesses. This is good for consumers.

But I wonder: what if Apple were to buy Palm in the near future? Palm's got a market cap of $825 million, and Apple's got over $28 billion in cash. So the finances would be easy.

Plus, an Apple takeover would negate any patent issues and allow Apple to digest and incorporate all of the relevant innovations in webOS. And it would give Apple a relationship with Sprint, the Pre's launch network, which would dovetail nicely with Apple's AT&T relationship for the iPhone.

If I were to plot such a takeover, I'd plan for it to be announced right after the Pre is launched. Apple would retain Palm in more or less its present form and would continue to sell and evolve the Pre and webOS product lines for the immediate future, while cross-pollinating technologies where appropriate (i.e. iTunes support on the Palm, webOS functionality, such as Synergy, support on the iPhone).

This would culminate in a reconciliation of the two product lines into a single family a few years down the road.

And in the interim, Apple would have eliminated a major competitor, gained a strategic relationship with a major competitor to AT&T, and consolidated its hold on innovation in the marketplace.

Sounds like an intriguing idea to me.