Palm grabs Handspring

Handheld maker Palm is buying smart phone company Handspring in an all-stock deal worth approximately $170 million. Palm is also to spin-off its operating system business, PalmSource, in a bid to grow the market.

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By  Peter Branton Published  June 5, 2003

Handheld maker Palm is buying smart phone company Handspring in an all-stock deal worth approximately $170 million. Palm is also to spin-off its operating system business, PalmSource, in a bid to grow the market.

The two companies said the merger is designed to create a new, stronger competitor in the increasingly-competitive computing and communications market. Palm has been facing increasing pressure from sales of smart phones – voice-centric devices with data capabilities – and from Microsoft, which competes against its OS with its own Windows CE. The market for PDAs is also currently weak, with shipments falling 21% year on year for Q1 2003, according to IDC.

Handspring makes smart phone devices, including its PDA/smart phone hybrid Cleo, based on the Palm OS. Palm said the combined company would have greater revenue opportunities, and would have cost savings of $25 million annually. There will be around 125 redundancies, the companies said.

“This is a merger of leaders – the world’s leading maker of handheld computers and a global leader of Palm OS based smart phones,” said Todd Bradley, Palm’s president and CEO.

Palm Middle East declined to comment on the transaction. Stuart Maughan, general manager of Palm Middle East said last month that the company had been inundated with demand for new models in the region. It has recently launched the Tungsten C model, aimed at business users, into the region.

The deal will also see the founders of Palm return to the fold. Jeff Hawkins and Donna Dubinsky founded Palm in 1992, leaving in 1998 to create Handspring. Hawkins will become chief technology officer for the new company and Dubinsky will become a member of the board of directors.

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