As per reports, HP has agreed to pay 5.70 dollars cash per share of Palm, a 23 per cent premium to its closing price on Wednesday, Apr 28 of 4.63 dollars.
This deal puts an end to the months of speculation over who would end up buying Palm, which once enjoyed a stronghold on the market.
However, Palm lost its grip with the arrival of Apple Inc's iPhone, Research in Motion's BlackBerry as well as the phone models that use Google's Android software.
Analysts have rationalised HP's move as a way to foray into the growing and promising smartphone market.
"I would say HP looked around and said, we need to be in this space. Google is here, Apple is here. And there aren't many stand-alone smartphone companies," Lawrence Harris, analyst at C L King associates is quoted as saying.
Even thought HP has its own smartphone, the iPaq, it failed to get enough attention of the consumers.
"They would be one of the few companies that I think could successfully turn Palm around," the analyst added.
The acquisition is expected to be completed during the third fiscal quarter ending Jul 31, HP said in a statement.
Palm's current chairman and CEO, Jon Rubinstein will continue with HP.