Palm Buying HandspringPalm Buying Handspring

Palm Inc. says it's buying handheld-computing rival Handspring Inc. in a deal valued at $180 million.

In acquiring Handspring, Palm would broaden its product portfolio and strengthen itself against foes including Sony and Kyocera. "It's the two large independents getting hitched," says Forrester analyst Frank Gillett. Palm will likely benefit from Handspring's expertise in creating hybrid cell phone/PDAs, he says.

But the buyout isn't likely to mean that much for business customers. "Handspring wasn't doing any big shakes for the enterprise," Gillett says. "This still doesn't change [Palm's] problems of creating real enterprise value, it just gives them a full range of hardware choices."

Palm co-founders Donna Dubinsky and Jeff Hawkins, both of whom left in 1997 to form Handspring, will help lead the combined company. Dubinsky, CEO of Handspring, would become a director of the new firm, and Hawkins, chairman and chief product officer of Handspring, would become CTO. Todd Bradley would continue as Palm's president and CEO. Eric Benhamou would remain chairman of Palm if the deal wins regulatory approval.

The deal, which already has been approved by the boards of both companies, is expected to result in the elimination of 125 jobs and save $25 million annually. The transaction is expected to close this fall.

Palm also announced that its board has approved a spin off of it's operating system subsidiary, PalmSource.