Palm to acquire rival Handspring

Palm said on Wednesday that will buy rival Handspring in an effort to strengthen its grip on the market for handheld devices. Palm, which also announced it has finalized plans to spin off its PalmSource software division, will purchase Handspring in a stock deal. The transaction will grant Handspring stockholders 0.09 of a share of Palm--and no shares of PalmSource--for each share of Handspring common stock. Based on Tuesday's closing price, that values each Handspring share at $1.09, slightly lower than Handspring's closing price of $1.11.

The deal is expected to close this fall, following the spin-off of PalmSource. Palm Solutions Group, the company's hardware arm, will then merge operations with Handspring, creating a new hardware company.

By adding Handspring's Treo hybrid cell phone/PDA to its own line of Palm personal digital assistants, Palm believes it can create a much broader product line, giving it an advantage in the market. The company also gains access to Handspring's technology and the company's relationships with resellers and cellular service providers.

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