Access Buys PalmSource and Palm OS

By Ed Oswald | Published September 9, 2005, 11:32 AM

The death knell may be ringing for the Palm OS as Japan-based Access announced on Friday that it had acquired PalmSource, the spin-off of Palm, Inc. that produces the operating system for Palm handhelds. The deal is worth $324.3 million or $18.50 per PalmSource share.

Access will pay an 83 percent premium on Thursday's closing price of $10.09, although by mid-morning PalmSource had skyrocketed $7.79 to $17.88 in heavy trading.

PalmSource's stock has languished since its debut in 2003, consistently losing value as investors doubted the company's business model and whether the operating system could survive on its own as a separate business.

The company has also had to deal with the falling out of the PDA market as consumers turn to smart phones, an area where Symbian and Nokia dominate.

The deal will give Access one of the broadest portfolios of mobile software in the industry, along with operating system platform expertise and resources to develop on the Linux platform for mobile devices. PalmSource has recently made a strategy shift toward supporting Linux.

"We are very excited about joining forces with Access to help create a leading provider of software for the mobile market," Patrick McVeigh, interim CEO of PalmSource, said. "We believe the customer and technology synergies of the combined companies will open up new market opportunities for both companies worldwide."

Approval of the merger is subject to the vote of PalmSource and Access' board of directors as well as their shareholders. The companies hope to have the merger complete by the end of this year.