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Palm To Acquire Handspring

Milpitas and Mountain View, Calif. – Palm today signed a definitive agreement to purchase PDA rival Handspring in a stock swap estimated at about $170 million.

The PDA companies said the merger would result in a single market leader with a wide product offering including the phone-centric TREO brand of PDAs from Handspring and the data-centric handhelds of Palm. At the same time, Palm said its board of directors approved the spin off of PalmSource, Palm OS and software company.

The deal has Handspring’s shareholders receiving 0.09 Palm shares — and no shares of PalmSource, which will be spun off, 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. The final cost will be based upon the stock share at the time of the transaction.

The remaining Palm Solutions hardware company would merge with Handspring and would retain its headquarters in Milpitas, Calif. CEO TODD BRADLEY, formerly president and CEO of the Palm Solutions Group will lead it. The company will be divided into two groups including a handheld computing solutions group led by Ken Wirt, currently Sr. vice president of Palm Solutions Group sales and marketing and a smartphone solutions group, led by Ed Colligan, presently president and COO of Handspring.

Jeff Hawkins, Handspring chairman and chief product officer will become chief technology officer for the merged company. Handspring CEO Donna Dubinsky will join the board of the new company.

All three current Handspring and Palm brands–TREO, Zire and Tungsten will be retained, said Palm.

Analyst Alex Slawsby for IDC, Framingham, Mass. said the acquisition is a positive move for both companies.

‘Handspring is rumored to be coming out with some compelling new devices-voice enabled product that resembles a single body phone. This is a good step because the more the unit looks like a true cellphone, the better the sales opportunities. Although Handspring has some good products coming out it only has enough cash to make it through the end of the year. So it certainly needed the lifeline.’

Palm could benefit from Handspring’s products, which are phone-centric, said Slawsby, adding, ‘Plus you have the opportunity for Jeff Hawkins and Ed Colligan to come back into the fold and bring their creativity and market abilities to Palm.’

At a news conference today, Bradley affirmed that the merger gives Palm Solutions new strength in the high growth segment of phone-centric PDAs, which is growing at a compound annual rate of approximately 76 percent, he said. Traditional handhelds are expected to grow at a rate of eight percent and data-centric PDA phones such as the Tungsten line, are expected to grow at a rate of 42 percent, he said.

Palm Solutions said the merged company would realize approximately $25 million in annual cost savings.

The acquisition should be finalized this fall.