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Palm buys Handspring, spins off PalmSource

Posted: 06 Jun 2003 ?? ?Print Version ?Bookmark and Share

Keywords:Palm? Handspring? personal computing? computer?

Palm Inc. has agreed to buy personal computing rival Handspring Inc. in a deal that will also see the spin-off of PalmSource Inc., a Palm subsidiary responsible for developing and licensing the Palm OS.

The deal brings closure to a withering personal computing rivalry that has existed since Palm's original founders, Jeff Hawkins and Donna Dubinsky, jumped ship to form Handspring in 1998.

Under the terms of the deal, and following the spin-off of PalmSource, Handspring's shareholders will receive 0.09 Palm shares - and no shares of PalmSource - for each share of Handspring common stock owned. Palm will issue approximately 13.9 million shares of Palm common stock to Handspring's shareholders on a fully diluted basis.

As a result of the merger, Handspring's shareholders will own approximately 32.2 percent of the newly merged company and Palm's shareholders will own approximately 67.8 percent.

The value per share for Handspring shareholders will be based on the Palm share price following the spin-off of PalmSource. That will occur immediately prior to the closing of the Handspring acquisition, which is expected to be completed in the fall. Handspring will then be merged with Palm and the merged company will be renamed.

"These two bold moves will serve as a powerful catalyst to transform the landscape of the handheld industry," said Eric Benhamou, Palm Inc. chairman and CEO as well as chairman of PalmSource. "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."

Benhamou added that the spin-off of PalmSource would help "attract additional licensees and unlock shareholder value."

Along with PalmSource, Palm includes the Palm Solutions Group, a business unit responsible for designing and manufacturing handheld devices.

Because of the large amount of overlap in technologies, the deal is expected to result in approximately $25 million in cost savings annually. Savings will come from the combination of laying off about 125 workers, elimination of overlapping programs and real estate sales. It is expected to yield increased volume in manufacturing and distribution.

Handspring employees are expected to move to Palm Solutions headquarters in Milpitas.

Palm said it would add its brand and distribution channels to Handspring's Treo product line and carrier relationships, while enhancing the Palm management team. That will include hardware and software design, engineering, and marketing that are expected to to help use handheld computing for a broader set of applications.

The merged company will be led by Todd Bradley, Palm Solutions Group president and CEO, who will continue in that role. It will be structured around two business units: handheld computing solutions, led by Ken Wirt, currently senior VP, sales and marketing, for Palm Solutions; and smart phone solutions, to be led by Ed Colligan, co-founder and current president and COO for Handspring.

Jeff Hawkins, Handspring's co-founder, chairman and CPO, will become CTO for the merged company.

Donna Dubinksy will remain as a member of Palm Solutions' board of directors, along with seven members from the current Palm Inc. board, plus three members from Handspring's board.

- Patrick Mannion

EE Times





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