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Hot off the Press - NEWS
Report from the AP

Palm #1, to acquire #2 rival Handspring.
San Jose CA. June 4th, 2003

Palm Inc., the leading maker of personal digital assistants, said Wednesday it plans to acquire challenger Handspring Inc., which was created five years ago by the people who had founded Palm.

The deal calls for the Silicon Valley rivals to merge after Palm completes its spinoff of PalmSource, the unit that makes the Palm operating system for handheld computers. The transactions are expected to be completed back-to-back in the fall, and the merged company will be renamed, the companies said.

Under the proposed terms, Handspring's shareholders will receive 0.09 Palm shares -- and no shares of PalmSource -- for each share of Handspring common stock owned. Palm will issue approximately 13.9 million shares of Palm common stock to Handspring's shareholders on a fully diluted basis.

As a result, Handspring's shareholders would own approximately 32.2 percent of the newly merged company, and Palm's shareholders would own approximately 67.8 percent.

The merger, which is expected to lead to 125 layoffs, was approved unanimously by the two companies' boards of directors. It still requires shareholder and regulatory approval.

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Palm shares were trading up $1.13 at $13.28 on Wednesday on the Nasdaq Stock Market. Handspring shares were up 10 cents to $1.21.

Mountain View-based Handspring has been struggling amid the tech downturn, fighting huge losses and trying to transition to a new product line -- what it calls communicators, a combined personal digital assistant and cell phone. It remains the No. 2 maker of handheld computers, however, trailing only Palm.

Palm officials said the acquisition and spin-off will strengthen the Milpitas-based company, which has had big losses of its own and now faces increasing competition from Microsoft Corp. and other handheld device makers.

The Handspring merger and the PalmSource spinoff ``will serve as a powerful catalyst to transform the landscape of the handheld industry,'' said Eric Benhamou, Palm's chairman and chief executive.

Palm was founded in 1992 by Jeff Hawkins and Donna Dubinsky and created the defining brand in handheld computers, the Palm Pilot. Palm was acquired in 1995 by modem maker U.S. Robotics, which in turn was gobbled up by 3Com Corp. in 1997. Palm was spun off as its own company in 2000.

Hawkins and Dubinsky left Palm in 1998 amid management conflicts and a desire to be at the helm of a startup again.



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