Palm Absorbs Be's Assets

Palm is acquiring the technology of Be, the software operating system and Internet applications company, for $11 million in Palm stock.

The Personal Digital Assistant vendor is also offering jobs to about 50 members of the engineering team from Be. The company's chief executive, former Apple executive Jean-Louis Gassee, will help oversee the integration as a temporary advisor.

Be's technology has been used in Internet appliances and as an embedded operating system. Be claimed a year ago that a million people had downloaded the free personal edition of its alternative operating system. At the time, analysts were skeptical how many of those downloaded copies were actually in use.

But Palm expects to put both Be's technology and the programming talent to work on its own projects. The addition of Be's technology and engineering talent will be synergistic in expanding the Palm OS platform into broader markets, says Carl Yankowski, Palm's chief executive officer.

The deal--which does not include Be's cash, receivables, and certain contractual rights--is expected to close within the next three months, pending regulatory approval and a vote by Be shareholders.

Expects Synergy

"By taking our outstanding team and infusing them with additional powerful resources like this--that are of the same mindset, but who have some additional expertise with things like multimedia, Internet and a lot of development tools--we just think it's a great combination," says Marlene Somsak, a Palm spokesperson.

Palm is already in the process of reorganizing itself to focus on particular aspects of the PDA market. Its executives say they are zeroing in its core business: hardware for handheld devices. It is also expanding the licensing of the Palm operating system. Palm claims the Palm OS is used by approximately three out of every four PDAs on the market today.

For example, in July Palm announced that Motorola, Intel, and Texas Instruments are all working on readying the Palm OS for use with more powerful chips, including some based on the ARM microprocessor core.

Broader Markets

The move was part of Palm's increased efforts to enable hardware manufacturers to design more innovative devices to run the Palm OS. The company is also encouraging its vendor partners to create more advanced applications for the devices.

Palm has previously announced that it plans to spin off the platform group into a wholly owned subsidiary by year's end.

In addition to announcing the Be technology and intellectual property acquisition, Palm says Alan Kessler, general manager of the company's platform group, is leaving that job on August 17. He is being replaced by Eric Benhamou, currently the chairman of the Palm board of directors and a member of the board's committee on the platform group.

Laura Rohde of IDG News Service contributed to this report.