Palm furthers enterprise push with acquisition

ITworld.com –

SAN FRANCISCO -- Palm Inc. has agreed to acquire Extended Systems Inc., a provider of infrastructure software that allows enterprise applications to be accessed from handheld computers, in a transaction valued at about US$264 million, Palm said in a statement issued Tuesday.

The deal is part of an ongoing effort by Palm to extend the popularity of its devices beyond individual users and into large enterprise accounts. The acquisition also furthers its strategy to boost the wireless capabilities of its handheld computers, the Santa Clara, California company said.

"Palm intends to be as popular with CIOs (chief information officers) as it is with individuals," Carl Yankowski, Palm's chief executive officer, said in the statement.

Extended Systems' makes infrastructure software that acts as the "glue" for binding enterprise applications, such as groupware and business applications, with handheld computers such as PDAs (personal digital assistants), Palm said. It also offers some Bluetooth connectivity software.

Palm said the deal positions it to sell both handheld computers as well as infrastructure software that works with multiple operating systems used in handheld gadgets. As well as the Palm OS, Extended Systems' software works with Microsoft Corp.'s Windows CE and Pocket PC, Symbian Ltd.'s EPOC operating system and the software used in Research in Motion Ltd.'s BlackBerry devices.

The acquisition also makes Palm a player in the mobile infrastructure software business for the first time, where it sees new revenue and profit opportunities, the company said. Furthermore, Palm gets access to engineers with experience in enterprise markets, and Extended Systems' customer base, which includes British Airways PLC, Cadbury Schweppes PLC and Daimler Chrysler AG.

Under terms of the definitive agreement, Extended Systems' stockholders will receive shares of Palm valued at $22 per Extended Systems' share, assuming certain conditions. The transaction values Extended Systems at approximately $264 million on a fully diluted basis, Palm said in the statement.

The acquisition is subject to the approval of federal regulators and Extended Systems shareholders.

Extended Systems is based in Boise, Idaho, and employs about 380 individuals worldwide. For the second quarter ended Dec. 31, 2000, the company reported revenue of $13.9 million and a net loss of $1.6 million, or $0.15 per share, Palm said. The company currently has Internet and print server businesses but plans to exit those areas to focus on its enterprise software, Palm said.

In a related move, Palm has restructured into three business groups in order to better cater for its expanding enterprise division. Effective immediately the company will be broken down as follows:

-- The Enterprise Solutions Group will incorporate "most" Extended Systems employees as well as Palm's current Enterprise Market Segment organization. To be led by Extended Systems President Steve Simpson, the group will be responsible for all Palm's enterprise solutions, including the new mobile services infrastructure business.

-- The Individual Solutions Group is responsible for Palm's handheld products for individuals, such as consumers, students and other professionals. It will be led by Palm Chief Marketing Officer Satjiv Chahil until a permanent general manager is named.

-- The Palm Platform Solutions Group (PSG) is being managed by Alan Kessler, who already has responsibility for the Palm OS, licensing and partnerships. He becomes the unit's general manager.

-- Barry Cottle becomes Palm's Chief Internet (Net) Officer (CNO), responsible for Internet alliances, reporting directly to Yankowski. He is also responsible for all marketing done by the Individual Solutions Group, reporting to Chahil.

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