PalmOne Buys Palm Brand Rights From PalmSource

PalmOne Inc. (PLMO), a maker of pocket-sized computers and mobile phones, Tuesday said it will pay $30 million to software maker PalmSource Inc. (PSRC) for all rights to the "Palm" brand name, and will change its name to Palm Inc. later this year.

PalmOne, whose products include Treo smartphones, also renewed its operating system license from PalmSource through 2009 for minimum royalty payments of $148.5 million.

Shares of PalmSource jumped as much as 15 percent on Nasdaq, fueled by optimism that PalmSource may soon score licensing deals with other device makers, analysts said.

The announcements came one day after PalmSource announced the surprise resignation of Chief Executive David Nagel. No reason was given for his Nagel's departure.

However, analyst Fulcrum Global Partners analyst Jamie Friedman attributes the success of the new licensing deal in part to the departure of Nagel, who had been criticized for not scoring more such deals during his tenure.

PalmSource Chairman Jean-Louis Gassee (search) "is moving aggressively to clean house and refocus on winning new licensees," Friedman said in a note to clients. "The last six months have brought the appointment of (new senior executives) and the prospect of a more effective CEO as PalmSource positions itself to capitalize on the opportunity in mobile software."

PalmSource, maker of the "Palm" operating system software used in devices made by PalmOne and other manufacturers, and PalmOne split in two in October 2003. Since then, the two companies have co-owned the Palm brand.

PalmOne will pay the $30 million over a period of three and a half years and has granted PalmSource certain rights to Palm trademarks for PalmSource and its licensees during a four-year transition period.

The Palm OS software licensing agreement includes $65 million for 2007 to 2009, subject to meeting certain development milestones. Palm OS (search) is currently the sole system used by PalmOne, but a spokeswoman said PalmOne would consider using another if it would help the company "reach new markets or new customers in ways that we can't today."

Demand for Palm-based products has slowed significantly from about four years ago, as Microsoft Corp. has gained market share with its software for pocket-sized gadgets and as many of the personal information management features in Palm devices began to appear in mobile phones.

Shares of PalmOne rose $1.08, or about 4 percent, to $28.34 on Nasdaq, while shares of PalmSource jumped $1.16 to $10.05 on Nasdaq.