Five years after the founders of Palm, Inc. bolted from the company to form Handspring, Inc., Palm is pulling them back in. Palm announced today that it is acquiring Handspring in a stock swap deal. In addition, Palm’s board of directors gave final approval to spin off its PalmSource subsidiary, which handles Palm OS development and licensing, into a new company. The Handspring purchase will happen after the PalmSource spin-off sometime in the third quarter of 2003, according to Palm. The new merged company, which will be renamed later in the year, retains two of the three founders that are responsible for Palm handhelds: inventor Jeff Hawkins will become Chief Technical Officer, and Handspring President and COO Ed Colligan will lead a new smartphone solutions group. It’s unclear if current Handspring CEO Donna Dubinsky will stay with the new company; Todd Bradley, the President and CEO of Palm’s Palm Solutions Group (which handles the hardware side of Palm development and sales) will keep his position, while a handheld computing solutions group will be led by Ken Wirt, currently Palm’s vice president for sales and marketing.
Although this move comes as a bit of a surprise, given that Handspring was founded because Hawkins and his team felt restrained by Palm (then owned by 3Com), it makes some sense in the current economy. After the launch of the well-received Treo line of phone-enabled handhelds, Handspring hasn’t made much noise or significantly updated its product lines (though they have been busy expanding Treo coverage in several international markets). Palm, on the other hand, has finally started to act like the company it promised to be, releasing new handhelds such as the Zire 71 and Tungsten family that do more than just the basics of previous models. Buying Handspring gives Palm immediate access to the burgeoning cellular phone/PDA market and offers additional resources against the growing Microsoft Pocket PC market. The acquisition also puts to rest any talk of Apple buying Handspring, a possibility that would have given Apple an entry into the cell phone and PDA markets.