News

In a shocking announcement this morning, Palm has acquired Handspring. Handspring has been fighting for survival and Palm has been trying to keep a step ahead of Sony. Now they'll fight together, the deal will be finalized this fall. The Palm board also gave the final approval for the PalmSource spin-off.

"These two bold moves will serve as a powerful catalyst to transform the landscape of the handheld industry. The strategic choice of merging Handspring and the Palm Solutions Group of Palm will create the broadest portfolio and the most-experienced leadership team in the industry, fully capable of delivering value to customers, partners and shareholders," said Eric Benhamou, Palm, Inc. chairman and chief executive officer, and chairman of PalmSource. "And the spin-off of PalmSource will help grow the Palm Economy, attract additional licensees and unlock shareholder value."

The merger is designed to create a stronger competitor in handheld computing and communication solutions. Palm Solutions will become better able to realize its stated objectives of growing the market, maintaining industry leadership, and achieving consistent profitability. The strategic and operational benefits to the merged company include:

-Maximizing Palm and Handspring's combined scale and operational excellence to take full advantage of future growth opportunities;   
-Delivering an unmatched portfolio of innovative mobile products from traditional and multimedia handhelds to wireless handhelds and smartphones;   
-Adding Palm's strong brand and distribution channels to Handspring's highly regarded Treo product line and carrier relationships; and   
-Enhancing the Palm management team
     -including hardware and software design, engineering, and marketing
     -to help drive handheld computing into deeper and broader solutions.

The merged companies expect greater revenue opportunities. They also expect to obtain improved operating efficiencies of approximately $25 million in cost savings annually. The cost savings assume combined employee reductions of approximately 125 people, elimination of overlapping programs and unnecessary real estate, and the advantages of increased volume in manufacturing and distribution. Handspring employees are expected to move to Palm Solutions headquarters in Milpitas, Calif.

The financial details and new board members can be found at the full release.

This is really strange. I don't know if this is good or bad for Palm, but I am completely shocked at the timing and total lack of recent rumors regarding this deal. For the past two years Handspring has been a frequent topic of acquisition, most frequently the rumor had Apple picking them up.

Handspring really needed this though. Essentially a one product company, their massive debt from the free spending internet boom had made growth and flexibility almost impossible. Then you have Palm, who released their integrated unit, the Tungsten W, a few months ago. The TW is considered by most to be a failure due to its lack of phone capabilities. The resulting synergies between the companies seem to make sense in the end. I just wonder how that first board meeting will go when the founders of Handspring are re-united with the team they left a few years ago.

We'll keep you updated as this story unfolds.