Access Agrees to Buy PalmSource for $324M
Japanese software company Access, maker of the NetFront Internet browser for mobile devices, said Friday it has agreed to buy PalmSource, maker of the Palm operating system for handheld computers and cell phones, for $324 million in cash.
Access is offering $18.50 for each share of PalmSource common stock, an 83 percent premium to the stock's Thursday closing price of $10.09 on the Nasdaq Stock Market. PalmSource shares surged 78 percent to $17.95 in early trading after the news. The stock has traded in a 52-week range between $7.39 and $27.20.
As part of the agreement, Sunnyvale, Calif.-based PalmSource will merge with the U.S. unit of Access to form a wholly owned subsidiary.
The Palm OS powers more than 39 million mobile devices, including Palm hand-held computers and mobile phones. PalmSource has been an independent software company for less than two years, having been spun off in October 2003 from Palm Inc., which makes Treo Smartphones, Tungsten Handhelds and other devices.
Palm was one of the most high-flying names of the technology boom of the 1990s, with its trademark Palm Pilot at the vanguard of handheld computing and its stock a darling of the Nasdaq.
But many other technology companies have since entered the arena and PalmSource has had to fight off competition from Microsoft and Symbian, which have snatched much of its market share for handheld operating systems.
In June, PalmSource said it was cutting its full-time work force in the U.S. by about 16 percent as it reorganized its sales, marketing and product development staff. At that time, it posted an operating loss of $700,000, or 4 cents per share, for the fourth quarter, a figure which excluded a $26.7 million gain from the sale of its interest in Palm Trademark Holding Co. to palmOne Inc., the former name of Palm Inc.
Still, more than 45 companies worldwide, including Palm, Sony Corp., Samsung Electronics Co., and China's Lenovo Group Ltd., have licensed PalmSource software.
For all of its fiscal 2005, PalmSource in June reported earnings of $19.5 million, up from a loss of $15.2 million a year earlier. Excluding items, the company posted a profit of $4 million, or 26 cents per share, up from $1.2 million or 10 cents in the prior year. Full-year revenue fell slightly to $71.9 million from $73.1 million a year ago.
Tokyo-based Access markets the NetFront Internet browser and other Internet technologies used in mobile devices and other consumer electronics, including digital TVs and Net-linking functions in cars called telematics.
The acquisition of PalmSource is expected to help Access expand its business providing mobile content delivery and Internet access software for mobile devices, gaining expertise and development sources in the U.
PalmSource's recent acquisition of China MobileSoft, a developer of Linux technology, is also a plus for promoting that open-source platform for mobile devices, said Toru Arakawa, Access' chief executive, in a statement.
"We are very excited about joining forces with Access to help create a leading provider of software for the mobile market," said Patrick McVeigh, interim chief executive of PalmSource. "We believe the customer and technology synergies of the combined companies will open up new market opportunities for both companies worldwide."