Is Palm Going to Buy PalmSource?

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There’s a rumor going around Wall Street that Palm, Inc. is going to re-acquire PalmSource.

As often happens in situations like this, this rumor has driven up the price of PalmSource shares. Early last week, they were trading around $7.50, and they are currently going for $9.50.

A Bit of History

At one time, Palm and PalmSource were one company. However, PalmSource was spun off in late 2003.

Palm (then known as palmOne) kept the hardware business, while PalmSource is responsible for developing and licensing the Palm OS.

PalmSource hasn’t had an easy time of it since it went independent.

It has had to layoff many of its employees and its stock price, which initially was around $40, has recently been as low as $7.40.

It spent a great deal of time and effort developing a version of its operating system –Palm OS Cobalt — that drew little or no interest from its licensees.

The company has now bet its future on Palm OS for Linux, another version of this operating system that it hopes will get it a larger share of the smartphone market.

Palm Palm, on the other hand, is doing quite well. It routinely announces profitable quarters and has a number of successful products.

It has the resources to acquire PalmSource if it wants to, but this might cause problems with the other Palm OS licensees.

The two companies originally separated because the other licensees complained that Palm’s handhelds had an unfair advantage, as they were made by the company that also developed the operating system.

On the other hand, the number of Palm OS licensees has dwindled in recent years, as Sony and Tapwave have left the market and Handspring merged with Palm itself.

Thanks to BargainPDA for the tip.

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