Long-suffering smartphone maker Palm finally may have found a financial savior. Hewlett-Packard, the world’s second-largest IT systems provider, announced in a teleconference that it has agreed to purchase the struggling smartphone maker for $1.2 billion in cash on hand, or about $5.70 per share.

An HP spokesperson said Palm’s current chairman and CEO, Jon Rubinstein, is expected to remain with the company. HP also said that it expects the acquisition to close during its third fiscal quarter ending July 31.

Palm, which makes the Palm Pre and other connected phones, has been struggling financially for most of the last decade. The company has invested a great deal of time and capital in its Linux-based WebOS along with the Palm Pre and Pixi (right), but it hasn’t been able to compete well with Apple’s iPhone and a flood of Android devices from several makers.

Palm sold only 408,000 phones last quarter; in contrast, Apple sold 8.7 million iPhones during the same time period.

HP, the world’s second-largest IT systems provider, now re-enters a business in which it has had limited visibility and success: connected telephones. But smartphones aren’t the only thing for which HP is investing so much “cash on hand” in Palm.

Todd Bradley, executive vice-president of HP’s Personal Systems group and a former executive at Palm Inc., told a webcast audience April 28 that HP sees not only a $100 billion smartphone market [and growing by 20 percent per year] to tackle but also new opportunities making “additional connected mobile form factors.”

Bradley didn’t say it outright, but his inference was to an HP-Palm branded tablet computer to compete with Apple’s super-hot iPad. However, HP executives declined to provide a timeline for when WebOS will make the leap to devices beyond today’s Pre and Pixi.

“We anticipate that with the WebOS, we’ll be able to aggressive deploy an integrated platform that will allow HP to own the entire customer experience, to nurture and grow the developer community, and provide a rich media experience for our customers,” Bradley said.

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