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Palm has agreed to acquire Extended Systems, a provider of infrastructure software that allows enterprise applications to be accessed from handheld computers, in a transaction valued at about $264 million, Palm says in a statement issued Tuesday.

The Extended Systems software works with Microsoft's Windows CE and Pocket PC, Symbian's EPOC operating system, and the software used in Research in Motion's BlackBerry devices, in addition to the Palm operating system. Palm says the deal positions it to sell not only handheld computers, but also infrastructure software that works with multiple operating systems used in handheld gadgets.

The acquisition furthers Palm's strategy to boost the wireless capabilities of its handheld computers, the company says. The deal is also part of an ongoing effort by Palm to extend the popularity of its devices beyond individual users and into large enterprise accounts.

"Palm intends to be as popular with CIOs as it is with individuals," Carl Yankowski, Palm's chief executive officer, says in the statement.

Extended Systems makes infrastructure software that acts as the "glue" for binding enterprise applications, such as groupware and business applications, with handheld computers such as personal digital assistants, Palm says. It also offers some Bluetooth connectivity software.

The acquisition also makes Palm a player in the mobile infrastructure software business for the first time, where it sees new revenue and profit opportunities, the company says. Furthermore, Palm gets access to engineers with experience in enterprise markets and to Extended Systems' customer base, which includes British Airways, Cadbury Schweppes, and Daimler Chrysler.

The acquisition is subject to the approval of federal regulators and Extended Systems shareholders.

Extended Systems employs about 380 individuals worldwide. For the second quarter ended December 31, 2000, the company reported revenue of $13.9 million and a net loss of $1.6 million, or $0.15 per share, Palm says. The company currently has Internet and print server businesses but plans to exit those areas to focus on its enterprise software, Palm says.

Under terms of the definitive agreement, Extended Systems' stockholders will receive shares of Palm valued at $22 per Extended Systems' share, assuming certain conditions. The transaction values Extended Systems at approximately $264 million on a fully diluted basis, Palm says in the statement.

In a related move, Palm has restructured into three business groups in order to better cater to its expanding enterprise division. Effective immediately, the company will be broken down as follows:

* The Enterprise Solutions Group will incorporate "most" Extended Systems employees as well as Palm's current Enterprise Market Segment organization. To be led by Extended Systems President Steve Simpson, the group will be responsible for all Palm's enterprise solutions, including the new mobile services infrastructure business.

* The Individual Solutions Group is responsible for Palm's handheld products for individuals, such as consumers, students, and other professionals. It will be led by Palm Chief Marketing Officer Satjiv Chahil until a permanent general manager is named.

* The Palm Platform Solutions Group is being managed by Alan Kessler, who already has responsibility for the Palm OS, licensing, and partnerships. Kessler becomes the unit's general manager.

* Barry Cottle becomes Palm's Chief Internet Officer, responsible for Internet alliances, reporting directly to Yankowski. He is also responsible for all marketing done by the Individual Solutions Group, reporting to Chahil.

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