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
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
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
PalmSource's OS, currently used in Palm, Kyocera
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.
Motley Fool Senior Analyst Tom Jacobs owns shares of Nokia and Microsoft.