Palm To Buy Handspring, Bringing Palm Founders Back

Reuters is reporting that Palm is buying Handspring, the company founded by Jeff Hawkins and Donna Dubinsky, who also founded Palm in the first place. Handspring was one of the first Palm OS licensees in 1997, and the company initially went after the low-end market for Palm devices, eschewing high-end industrial design, as represented in such products as the Palm V, in exchange for no-nonsense, back-to-basics designs. The company also focused on expansion capabilities, bringing memory sticks and expansion models to the Palm world.

Today, both companies have faced pressure from falling PDA sales and mounting pressure from PocketPC powered devices from competitors such as Compaq, and now Dell. Competition from the cell phone market has also hurt Palm sales, as consumers have sought to bring all of their mobile devices into one form factor.

In addition to the acquisition of Handspring, Reuters is reporting that Palm will spin off its PalmSource unit. From Reuters:

Alex Slawsby, an analyst for market research firm IDC, said of the Palm-Handspring deal, "Itis something that has been rumored. Itis one of the hottest things to speculate on and it has been that way for years now.

"It finally got to the point where Handspring was making progress in the direction of telephony and data -- what we call converged devices. I think those really fit in with Palmis goals of improving its telephony presence."

Palmis board also approved the spin-off of its PalmSource unit, which makes the operating software for Palmis handhelds. Following the spin-off, Palm will swap 0.09 share of its common stock for each Handspring share.

Palm plans to issue 13.9 million common shares to Handspring holders. Based on Palmis Tuesday closing price of $12.15 on the Nasdaq stock market, the deal would be worth about $169 million. It was unclear how Palm shares would be valued after the spin-off of PalmSource.

There is additional information in the full story at Yahoo!is Web site.