November 8, 2001 3:10 PM PST

Palm moving ahead with spinoff

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After earlier announcing plans to create a subsidiary for its operating system, Palm on Thursday said it is looking to divide itself into separate, publicly traded companies.

"We are looking to move into external separation next year," acting CEO Eric Benhamou told CNET News.com on Thursday, shortly after the company announced that Carl Yankowski was resigning as Palm's chief executive.

Benhamou said the external separation could take the form of a spinoff to shareholders, an initial public offering or an investment by a third party. He did not give a time frame for how long it would take to achieve external separation, but said the company will look to start the process in January.

"All of these scenarios are possible," he said. "I don't want to speculate. The market could go up, and it might become more popular to have IPOs. But we have many other options."

Benhamou said the idea is that Palm would be separated into independent companies that each have their own ticker symbols and investors.

Palm has already announced plans to make the operating system unit a wholly owned subsidiary of the company by the end of the year, a move Benhamou said is on track.

Benhamou said the move to separate the businesses is one of a series of steps the board of directors took in response to the problems Palm encountered earlier this year. He acknowledged the desire from outsiders to take action sooner, but said the board preferred a more measured approach that included restructuring the company and bringing in new leadership in David Nagel and former Gateway executive Todd Bradley.

"There are a lot of people that have (a) knee-jerk reaction," Benhamou said. "We're not this kind of company."

As a result of the move, Benhamou said it was time to bring in a CEO who can focus on the hardware business.

"Now is a good natural milestone for (Yankowski) to move on," he said.

Nagel was hired earlier this year to lead the operating system, or platform, business.

As part of a lucrative pay package, Nagel received options to buy 6.5 percent of the shares of the Palm OS business once the unit is made a subsidiary. Nagel, a Palm board member, also received two restricted grants of Palm shares, a $620,000 salary, and a $200,000 hiring bonus, according to terms stated in a filing with the Securities and Exchange Commission. The same filing also noted that a spinoff to shareholders, an IPO, or third-party investment were all possibilities for the OS business.

 

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