PalmSource Acquired… but Not by Palm

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PalmSource, the company responsible for developing and licensing the Palm OS, has been bought by Japan-based Access Co., Ltd.

Palm users probably familiar with Access as the developer of the web browser NetFront.

“PalmSource’s earlier acquisition of China MobileSoft, a developer of Linux technology, provides the foundation to promote Linux-based platforms for mobile devices,” said Toru Arakawa, CEO of Access. “By combining Access’ robust NetFront browser platform and its proven business relationships with PalmSource’s advanced operating system, application portfolio, user interface, and developer communities, we will be able to produce a comprehensive yet flexible solution for the mobile market.”

PalmSource will merge with Access’ U.S. division, which will become a wholly owned subsidiary of the parent company.

Good for PalmSource

PalmSource, once part of Palm, Inc. was spun off in late 2003.

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.

The company has bet its future on Palm OS for Linux, but many have questioned whether it had the resources to finish the project.

There have been repeated rumors that PalmSource would be reacquired by Palm, Inc., but this might have caused 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.

Good for Access

Access’s NetFront web browser is widely used in Japanese 3G phones, but it hasn’t made much headway in other countries.

It is supposed to be the default web browser for the Palm OS, but the biggest licensee, Palm, Inc., uses its own browser, called Blazer.

It’s possible that Palm will now be under greater pressure to switch to using NetFront. Blazer was originally based on this browser, but it has been modified quite a bit by Palm.

Financial Details

This will be an all-cash transaction, with Access paying $18.50 per share of PalmSource common stock, or about $324.3 million.

The $18.50 per share offer is an 83 premium, as PalmSource’s stock closed yesterday at $10.09.

Not surprisingly, this news has caused the price of PalmSource shares to shoot up over 75 percent, to about $18.

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