November 14, 2005 11:45 PM PST

PalmSource acquisition finalized

PalmSource, which owns the rights to the Palm operating system, is now in the hands of Japan's Access, executives announced late Monday, starting a new chapter for the once struggling company.

Finalization of the $324.3 million transaction means that PalmSource is now a wholly owned subsidiary of Access and will no longer be a separate publicly traded company. PalmSource traded on the Nasdaq under the symbol PSRC.

"As a result of the acquisition, each outstanding share of PalmSource common stock has been converted automatically into the right to receive $18.50 in cash," the company said in a statement. Additional financial details were not available.

Access--a maker of software for mobile devices--said it wants to finish creating the Linux-Palm operating system hybrid that PalmSource started when it finalized its acquisition of China MobileSoft this year.

There are more than 39 million Palm-powered devices made by Palm and more than 40 other manufacturers, including Japan's Sony and Kyocera, and South Korea's Samsung Electronics, according to company estimates.

Earlier in the day, PalmSource said it is now a founding member of the Linux Phone Standards (Lips) Forum, whose goal is to spread Linux to more mobile devices. The consortium established this week includes the likes of France Telecom/Orange, FSM Labs, Huawei, Jaluna, MontaVista Software, MIZI Research, Open Plug, Arm, Cellon and Esmertec.

Ultimately, Access said it will combine its Linux-based NetFront browser with the Palm OS version 5x--also known as Garnet. Access may even revisit the Palm OS version 6, known as Cobalt, which was not broadly licensed by PalmSource, executives have said.

In support of the transition, Palm president and CEO Ed Colligan last week issued an open letter reiterating his company's support for its namesake operating system even as the company readies its first Windows-based Treo. Palm has also extended its contract to support the Palm operating system from PalmSource until 2009.

Before it was courted by Access, the Palm spin-off had been struggling to win new licensees in the face of increased competition from Microsoft and Symbian.

The company's final quarterly report found the Sunnyvale, Calif.-based company losing 94 percent of its related party license and royalty revenues in one year, down from $1.07 million in the third quarter of 2004 to a mere $63,000 at the end of this October.

Palm's Colligan told Computer Business Review in October that he would "probably not" have separated the operating system group had he been in charge at the time. Colligan was serving as a Handspring executive when Palm chairman Eric Benhamou split the company, with Todd Bradley heading PalmOne and David Nagel in charge of PalmSource.

PalmSource eventually sold all Palm brand rights to Palm, formerly PalmOne, in May for $26.7 million.

In addition to Access, PalmSource was approached by other companies between late May and July. The Chicago Sun Times first reported that a mysterious company, "Company A," turned out to be Motorola. The unsolicited takeover bid of $17.25 per share failed and Motorola--unable to change its fate--has filed suit against PalmSource to get its termination fee back.

 

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