(June 4, 2003) - In a $170 million deal, Palm, Inc. will acquire Handspring Inc., and will spin off PalmSource, a subsidiary responsible for developing and licensing the Palm operating system. The merger is viewed as a strategy to survive the current downturn in the handheld computer industry. Both Palm and Handspring posted losses in the most recent quarter, and expect losses in the current quarter. The merger will result in the loss of about 125 jobs, but improved operating efficiencies are expected to result in approximately $25 million in cost savings annually.

The transaction, encompassing the spin-off of PalmSource and the merger of Handspring with the remaining Palm Solutions Group of Palm, is expected to close in the fall. Immediately following the completion of the spin-off, Handspring will be merged with Palm, and the merged company will be renamed later in the year. Handspring employees are expected to move to Palm Solutions headquarters in Milpitas, California.

The merged company will be led by Todd Bradley, who will continue as president and chief executive officer. Eric Benhamou, current chairman of Palm, will be chairman of both PalmSource and the combined company. Jeff Hawkins, Handspring chairman and chief product officer, will become chief technology officer for the merged company. Donna Dubinsky, CEO of Handspring, will be a director of the combined company.

Handspring was founded in 1997 by Dubinsky and Hawkins, who were also the founders of Palm.