Palm and Handspring Merge, PalmSource Goes Independent

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Palm, Inc. and Handspring, Inc. have just announced that stockholders of both companies have approved a transaction that will see the two companies merge. At the same time, PalmSource is becoming an independent company.

At Palm’s Annual Stockholders Meeting today, stockholders approved the spin-off of PalmSource, Inc. PalmSource common stock will debut on the Nasdaq stock market tomorrow. This new company will develop and license the Palm operating system.

“As a stand alone public company, PalmSource can focus on maximizing stockholder value by advancing the Palm OS platform into exciting new and existing markets. Our licensees, our stockholders and all of the employees of PalmSource are delighted to become a publicly traded company, and we are committed to acting quickly to realize the tremendous opportunity this represents,” said David Nagel, president and chief executive officer of PalmSource.

This change is expected to result in the number of Palm OS licensees increasing, though PalmSource hasn’t said who any of these new licensees might be.

Palm and Handspring Merge

palmOne logo Palm stockholders also approved the acquisition of Handspring, Inc. Separately, Handspring stockholders approved the acquisition of their company by Palm. The new company is named palmOne and it will make both handhelds and smart phones that run the Palm OS.

“This merger of leaders gives palmOne significant advantages as we build on delivering what matters most to customers, including the high-potential category of smart phones,” said Todd Bradley, palmOne president and chief executive officer. “We’ll work to continue pleasing customers from the newest consumer who is just now moving beyond paper organizers to the multimedia enthusiast, and from the mobile professional to the chief information officer.”

Ed Colligan Todd Bradley, Jeff Hawkins The merged company will be led by Todd Bradley, who is currently the head of the Palm Solutions Group. It will have two business units: handheld computing solutions, led by Ken Wirt, currently a senior VP for Palm Solutions; and smart phone solutions, to be led by Ed Colligan, current president and CEO for Handspring. Jeff Hawkins, Handspring chairman and chief product officer, will become chief technology officer for the merged company.

Donna Dubinsky, CEO of Handspring, will join palmOne’s board of directors but apparently have no other role in the new company. Eric Benhamou will no longer be CEO of Palm Inc. but will be chairman of PalmSource and palmOne.

Details of the Deals

Palm will distribute all the shares of PalmSource it owns (approximately 86 percent of the total) to Palm stockholders of record as of the close of business today. Those Palm stockholders will receive approximately 0.31 shares of PalmSource common stock for each share of Palm common stock they own. PalmSource common stock will trade on the Nasdaq stock market under the ticker symbol PSRC, starting tomorrow.

Palm’s acquisition of Handspring will be completed as a merger, with Palm issuing approximately 13.9 million shares to Handspring stockholders. Handspring’s stockholders will receive 0.09 Palm shares for each share of Handspring common stock owned. The resulting company has been renamed palmOne, Inc. Its common stock will trade on the Nasdaq stock market exchange under the ticker symbol PLMO, starting tomorrow.

A Brief History of Palm

Palm, Inc. began operations in 1992 as Palm Computing. It was co-founded by Jeff Hawkins, Donna Dubinsky and Ed Colligan. In 1995, while looking for investors to help it launch its first handheld computer, Palm accepted an offer to be purchased by modem-maker U.S. Robotics Corp. In 1996, with Hawkins and Dubinsky at the helm, Palm released the Pilot 1000 and Pilot 5000 handheld computers.

However, in 1997, 3Com Corp. acquired U.S. Robotics and Palm became a subsidiary. It wasn’t long before Hawkins and Dubinsky felt stifled by the 3Com corporate bureaucracy and urged chief executive officer Eric Benhamou to spin Palm off as a separate company. He declined. Finding the arrangement untenable, Hawkins and Dubinsky left Palm in 1998 to form JD Technology, which later became Handspring, Inc. Colligan soon joined them.

In an odd twist of fate, 3Com spun-out Palm as an independent, publicly traded company in early 2000. And in 2002, Palm formed PalmSource, Inc. as a wholly owned subsidiary responsible for developing and licensing the Palm platform.

Finally, in 2003, Palm announced the acquisition of Handspring, Inc., bringing Hawkins, Dubinsky and Colligan back into the fold.

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