PalmSource Spins Off Of Palm, Ending 2-Year Struggle

NEW YORK— PalmSource's first two days of life outside of Palm Inc. were action-packed with Palm's shareholders giving their blessing for the company to split off and be listed separately on the NASDAQ.

These events capped a two-year-long struggle by Palm executives, led by David Nagel, the new firm's CEO,

to separate itself from Palm Inc. and become a standalone company. PalmSource will now handle development and licensing of the Palm OS, while the original Palm will manage the hardware side of the business.

"With this split, we can now focus on what we do," Nagel said.

He described the spin off process as a monumental task that took much longer than first anticipated.

"This was two years in the making and a much more difficult task than I expected," he said.

To illustrate the deal's complexity, and the usefulness of Palm OS-based devices, Nagel showed images on a smartphone of all the documents, which filled a handcart, that needed to be created and signed before PalmSource could be spun off.

Palm's acquisition of Handspring during the past year was another time-consuming task that forced all those involved to temporarily take their eyes off the PalmSource proceedings.

PalmSource originally was expected to launch earlier this year, said Gabi Schindler, worldwide marketing senior VP.

Despite these trials, PalmSource has gone ahead and set up a co-marketing promotion with Sony in Office Depot and Staples. The program gathers all Sony, Palm and handheld accessories in one large in-store display, Schindler said.

"This gives a platform message and it is very important to market with our partners," she said.

PalmSource's primary occupation will be to improve the Palm OS. The next version, Palm OS 6 is in the final stages of development, and hardware featuring the software should be out late next year, Nagel said. Palm OS 6's most important changes will be the inclusion of more wireless communications capability and security.

Nagel highlighted the smartphone segment of the market as holding the most promise for future sales. PalmSource cited data from IDC, Framingham, Mass., that indicated SmartPhones could comprise 58 percent of the handheld market by 2007.

The new company's other job will be to manage its relationship with the 250,000 Palm OS developers around the world.