HP makes low-ball rescue bid for Palm

Hewlett-Packard has made a surprise $1.2 billion bid for troubled mobile maker Palm.

The deal would give Palm, which has struggled to regain its first-mover momentum in the face of competition from the likes of Apple, a much-needed exit strategy.

While Apple can seemingly shift millions of units of anything it prefixes with an i-, Palm's recent Pre and Pixi phones have not sold as well as expected.

For HP, the deal would give a substantial boost to its relatively tiny mobile business.

But while the offer has been approved by the boards of both companies, it may not be plain sailing for the merger.

For starters, while the $5.70 per share offer represents a decent premium on Palm's $4.63 closing price yesterday, it's substantially below Palm's 52-week high of almost $18.

Its stock also jumped to $5.88 in after-hours trading, suggesting that investors believe either HP will have to up its offer, or that another bidder could enter the picture.

The legal vultures are in fact already circling.

At least two class-action specialist law firms have announced they are 'investigating' whether the deal represents good value for Palm shareholders within a couple of hours of the deal's announcement.