Palm acquires Handspring

Palm acquires Handspring

Palm has announced that it is acquiring its best-known software licensee, Handspring.

The deal, just approved by both boards of directors, should become final later in the year. It will take place as Palm completes the separate spin-off of one of its own businesses, PalmSource, which develops and licenses the Palm OS software.

The other business, Palm Solutions Group, which designs and builds Palm OS-based handheld computers, will merge with Handspring. The new company will get a new name.

The result will be a hardware company with two divisions, one focused on handheld computers (the Palm Solutions Group legacy), the other focused on smart wireless phone, that is the market targeted by Handspring with its well-received Treo phones.

Palm has been pushing its software aggressively as a platform for a range of handheld devices, as Microsoft has been doing with its rival Windows CE. The huge handset market is seen as a ripe opportunity for both vendors, on the assumption that higher bandwidth, more reliable data services from carriers, and more sophisticated handset features will persuade cell phone users to do something other than talk with these devices.

In a statement, executives said they expect to save about $US25 million a year by dismissing about 125 employees, cutting overlapping programs, consolidating real estate holdings, and increasing manufacturing and distribution volumes.

The merged company will be headed up by current president and CEO of Palm Solutions, Todd Bradley. Handspring Chairman, Jeff Hawkins, one of the original co-founders of Palm in 1992 and of Handspring in 1998, will become CTO for the merger. Donna Dubinsky, Handspring's current CEO (and like Hawkins a co-founder of both companies) will apparently not have a position in the new venture.

Handspring shareholders will get 0.09 shares of the parent company, Palm Inc., for each share of Handspring common stock they currently own. Palm plans to issue about 13.9 million shares of Palm common stock to Handspring's shareholders, on a fully diluted basis. At the end, these shareholders will own about one-third of the merged company.

Value per share will be based on the Palm share price following the spinoff of PalmSource.

Over the past year, Palm's stock has dropped from about US$35 per share to just over $10. Handspring's stock in the past year has ranged from just over US$0.50c per share to a little over US$2 per share. Both have fallen steeply since 2000.

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