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Issue #2003 - 19 (June 2003)
(Updated June 19, 2003)


Palm Acquires Handspring, But Still Faces Tough Challenges

One of the hottest news items this month in handheld device industry was the decision by Palm Inc. to acquire rival Handspring Inc., For those who did not read this elsewhere, here are the highlights:

  • All-stock deal  - the deal is valued at $170 million US. Palm would pay 0.09 Palm share for each Handspring share.
  • Handspring gets 32.2 % stake in the combined company. Palm is 2/3rd and Handspring is 1/3rd approximately
  • PalmSource will be spun off as a separate company in the fall of 2003.
  • From product side, Handspring brings to Palm, Treo. Palm has Tungsten and Zire.
  • From management lineup perspective, Donna Dubinsky and Jeff Hawkins go back to his alma mater.
  • Merged company will consist of two units - Handheld Computing Solutions unit - headed by Ken Wirt and Smartphone unit, headed by Ed Colligan, Handspring's President. Tom Bradley will be the CEO of the merged company.

MobileInfo Comments and Advisory: Palm-Handspring merger perhaps is a telling story in the wireless market in general and handheld device market in particular. We read the following from this:

  1. Palm was hot when it was US Robotics. Its acquisition by 3COM was its salvation as well as its downfall. 3COM did not understand very well consumer market. It tried to do the right thing by creating a separate company but soon lost its aggressive and market-focused management. Palm should not have allowed Handspring to happen to start with. The handheld device market was never that huge - PDAs can not substitute cellular phones.  Competition, economy and slow economic environment during the past few years have taken the steam out of device balloon.
  2. Bringing back Handspring into Palm will help both companies. Therefore, users should welcome this move. 
  3. This merger starts the rationalization and market consolidation. We expect several other device vendors to fall by the way side or get acquired. Palm does have a good likelihood of surviving. It does cater to the professional customers' mindset and three essential products to support that - Zire for the consumer, Tungsten for the enterprise and Treo for those who want a converged product. There are virtually thousands of applications and developer community.
  4. Palm's competition is from Microsoft's Pocket PC based products and Symbian-based smart phones. For the enterprise, Pocket PC is superior in many ways. Palm must address that.
  5. Enterprise IT professionals should evaluate Palm devices in terms of their simplicity for office and simple vertical applications. There is nothing wrong in supporting multiple devices. In fact, we believe, that most medium and large organizations must support multiple devices - PalmOS, Pocket PC and a small subset of smart phone. Short-listing the subset in a generalized way is tricky and we would not try that. 

Note: This news release may contain forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of Securities Exchange act of 1934 in USA. Similar provisions exist in other countries. There is no assurance that the stipulated plans of vendors will be implemented. MobileInfo does not warrant the authenticity of the information. Readers should take appropriate caution in developing plans utilizing these products, services and technology architectures.  All trademarks used in this summary are the property of their respective owners.

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