Struggling to deliver shareholder value and find its way to a profitable future, Palm completed a long-awaited spinoff yesterday and became two companies -- Palm OS (operating system) software and licensing arm PalmSource (NASDAQ:PSRC) and PDA manufacturer palmOne (NASDAQ:PLMO).

The action came swiftly after shareholders approved plans for Palm to spin off the software arm as PalmSource; issue 13.9 million shares to reabsorb ailing Handspring, swapping 0.09 Palm share for each Handspring share; and change Palm's name to palmOne. Handspring shareholders will own 32.2% of palmOne and Palm shareholders the rest.

PalmSource shares promptly soared $11 or 38% to close at $39.50, while palmOne dropped $0.74 or 4.1% to a $17.50 finish. Investors apparently favor the software division's high margins to the competitive business of PDA manufacturing. Seems a little optimistic, given that both operations lost money in the most recent quarter and both face severe competition.

With PDA sales set to decline this year, palmOne wants to move beyond PDAs. It's currently No. 1, followed by Hewlett-Packard (NYSE:HPQ), Sony (NYSE:SNE), Dell (NASDAQ:DELL), and Toshiba, but its market share declined to 35.6% from 41.8% in Q2, while HP's increased to 24.5% from 17.6%. Dell's entry a year ago brought aggressive pricing and more pain to Palm, which has dominated the market for lower-priced PDAs.

palmOne hopes that with Handspring's Treo line it can gain market share in smartphones that combine mobile phone and PDA features and compete with Samsung and Nokia (NYSE:NOK). No longer pressured to use PalmSource's OS in all its products, palmOne can be free to produce a variety of devices driven by different operating systems.

PalmSource's OS, currently used in Palm, Kyocera (NYSE:KYO), Sony, and Samsung devices, competes against Microsoft's (NASDAQ:MSFT) CE and the Symbian OS, from the Psion consortium that includes Nokia. PalmSource expects to introduce a new operating system this fall.

The former Palm's $7.39 in net cash per share may cushion losses when divvied up, but neither company is an attractive investment. Aggressive investors may even consider palmOne for a short.

Please offer your opinions on these two news companies with other investors on our palmOne and PalmSource discussion boards.

Motley Fool Senior Analyst Tom Jacobs owns shares of Nokia and Microsoft.