Palms Shake Hands

It's baaaaaaack.

Palm, Inc. -- the pioneering maker of personal digital assistants (PDAs) -- has come full circle. After dividing itself into palmOne (Nasdaq: PLMO  ) and PalmSource (Nasdaq: PSRC  ) less than two years ago, the company returns this fall. But it won't be the same as before.

The old Palm was an integrated manufacturer, born of the Palm operating system for handheld computers and its sleek line of PDAs. The new Palm will be, well, palmOne. Today the company bought the rights to the name from software partner PalmSource in a three-year deal worth $30 million. palmOne will be recast as Palm later this year.

A rebranding typically doesn't mean all that much -- but this one is combined with what appears to be a business restructuring. According to researcher Stanford Group, PalmSource's co-ownership of the Palm name kept palmOne from developing devices featuring other handheld operating systems. The rights transfer could mean palmOne is readying a device built on alternatives from Microsoft (Nasdaq: MSFT  ) , Symbian, or even the Linux open-source OS, Stanford's research note stated.

The strategy makes sense. palmOne has seen its PDA marketshare decline in recent months, and its international presence is limited, at best. Introducing a wider array of models for different needs and markets could quickly provide a moderate sales boost. In the long term, it could help offer a stiffer challenge to rivals such as Research In Motion (Nasdaq: RIMM  ) .

In the meantime, PalmSource gets the cash infusion it needs as it attempts to revive its flagging fortunes. It also doesn't hurt that palmOne has agreed to extend its license for the PalmOS out to 2009 for a minimum aggregate royalty payment of $148.5 million.

Both of Palm's offspring ought to profit from today's handshakes. Yet I suspect the long-term impact will be minimal. Let's be honest: Faith in the Palm name is touching, and there may be some sentimental loonies who let it sway their PDA buying habits. But that won't make a penny's worth of difference to earnings. For the foreseeable future, only one name matters to palmOne investors: Treo.

Get a grip on Palm with these handy Fool takes:

Fool contributor Tim Beyers gets more calls on his Treo 600 than his normal office phone lately. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what's in his portfolio by checking Tim's Fool profile, which is here. The Motley Fool has a disclosure policy.


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