Hewlett-Packard Co. (HP) on Wednesday announced that it has agreed to buy Palm Inc., the Silicon Valley-based smartphone maker, for about 1.2 billion U.S. dollars.

The two companies said that under their agreement, HP will purchase Palm at a price of 5.7 dollars per share of Palm common stock in cash or an enterprise value of approximately 1.2 billion dollars.

Palm, founded in 1992, is a pioneer in the mobile computing and smartphone market. However, the company has been struggling in recent years amid fierce competitions from technology giants such as Apple.

Palm tried to turn its fortune last year by introducing a new webOS mobile operating system and new handsets such as the Palm Pre. But lukewarm sales of the products have put its future in doubt and the company has recently become subject of takeover speculations.

Palm's webOS operation system is seen by HP as an ideal platform to expand its mobility strategy and create a unique experience spanning multiple mobile connected devices, according to Todd Bradley, HP's executive vice president of Personal Systems Group.

"We are excited about the opportunities represented by both Palm and the webOS," Todd Bradley told Xinhua in a telephone interview.

"The webOS operating system will support many products, both smart phones and slates," he said.

"Our ability to create that HP experience is significant and important to us," Bradley noted.

In a statement, Palm's chief executive officer Jon Rubinstein believed that "HP's longstanding culture of innovation, scale and global operating resources make it the perfect partner to rapidly accelerate the growth of webOS."

"We're thrilled by HP's vote of confidence in Palm's technological leadership, which delivered Palm webOS and iconic products such as the Palm Pre," he said.

The transaction has been approved by HP and Palm boards of directors and is expected to close during HP's third fiscal quarter ending July 31, 2010, the two companies said.