Thursday, June 5, 2003

Palm, Handspring to become one

The Associated Press

SAN JOSE, Calif. - In hopes of surviving in an ever more crowded industry, handheld computer maker Handspring Inc. plans to merge with Palm Inc. - the very company that Handspring's founders launched a decade ago but broke away from amid management conflicts.

"It's like the reunion of twins separated at birth," said Steve Baker, technology researcher at NPD Intelect.

Palm, the leading maker of personal digital assistants, said Wednesday that it plans to acquire Handspring in the fall after it completes its spinoff of PalmSource, the unit that makes the Palm operating system for handheld computers. The merged company will be renamed, the companies said.

The deal could give Palm a desperately needed foothold in the market for handhelds with phone and wireless data functions and jolt Handspring with an infusion of cash and marketing power.

Under the proposed terms, Handspring's shareholders would receive 0.09 Palm shares - and no shares of PalmSource - for each share of Handspring common stock. Palm would issue about 13.9 million shares of common stock to Handspring's shareholders on a fully diluted basis.

As a result, Handspring's shareholders would own 32.2 percent of the new company, and Palm's would own 67.8 percent.

The value of the stock swap would be $169 million, based on Tuesday's closing prices. But the final value will be based on Palm's share price following the PalmSource spinoff.

The merger, which is expected to lead to 125 layoffs, was approved unanimously by the two companies' boards. It still requires shareholder and regulatory approval.

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