Palm to buy software maker Be

16 Aug 2001 15:17

Update: For a snip at $11m in stock, Palm will acquire a full-blown PC operating system tailored for webpads and other Internet appliances

Palm on Thursday announced it is acquiring the assets and intellectual property of software maker Be for $11m in stock, as it pursues its goal to bolster its software division.

"This move will help us expand the Palm OS platform into broader markets using their multimedia media and Internet expertise," Carl Yankowski, Palm's chief executive, said in a statement.

Palm also said that Alan Kessler, the general manager of its Platform Solutions group, will resign from the company on Friday. Neither the company nor Kessler disclosed why he is leaving.

Eric Benhamou, chairman of the company's board of directors, will act as chief executive officer of the group until a permanent replacement is named, according to Palm, which is based in Santa Clara, California.

Be's chief executive, Jean-Louis Gassee, will temporarily help Palm to integrate Be's technology and work force once the transaction is approved by Be shareholders.

Be, founded by former Apple executive Gassee, originally focused on providing an operating system fine-tuned for audio and video production. In the face of Microsoft's dominance in the operating-system market, Be has mostly been on wobbly ground.

The deal marks a rather inglorious end to the company that Gassee when he left Apple Computer in 1990.

In 1996, Apple offered as much as $125m for Be, according to the book "Apple Confidential". But Gassee and Be's backers held out for more. Instead, Apple acquired Steve Jobs' Next and Be was left to fend for itself.

Be has frequently struggled to find customers for its operating system. Its only notable win of late was a deal to power Sony's eVilla Web-surfing appliance.

Last month, Palm said it planned to create by year's end a subsidiary for the part of its business that develops and licenses the Palm operating system. Palm currently runs as a single operation, with units that develop the handheld hardware and the operating system. The two divisions, however, invariably clash with each other, raising tensions. While the software division licenses its operating system to handheld makers such as Sony, Handspring and HandEra, the hardware division competes with those companies.

Gassee will also provide advice related to the planned separation of the units.

Shares of Palm have been battered -- falling more than 85 percent this year - -in the face of stiff competition from a growing crop of handheld makers and a souring worldwide economy. Although the company maintains its No. 1 position in the handheld market, its sales in the corporate sector lag behind those of competitors.

Earlier this month, Dataquest released a study indicating that global shipments of handheld computers plummeted 21 percent from the first quarter to the second.

News.com's Ian Fried contributed to this report.

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Story URL: http://news.zdnet.co.uk/hardware/0,1000000091,2093234,00.htm