Thursday, December 9, 2004
PalmSource to buy China MobileSoft
REUTERS
NEW YORK: Software provider PalmSource on Wednesday said it will buy China MobileSoft in a stock deal aimed at spurring its growth in the market for mobile phones, including Linux-based devices, and to gain a local presence in China.
PalmSource said that under the deal it would issue about 1.57 million common shares in exchange for the outstanding equity and rights to acquire equity in China MobileSoft, based in Nanjing, China. That values the deal at about $22.6 million, based on PalmSource's closing share price of $14.40 on Nasdaq on Tuesday.
PalmSource's software is mostly used in personal digital assistants, or PDAs, pocket-sized organisers without phones whose demand has cooled after rapid growth about four years ago.
It also powers so-called "smartphones" like PalmOne's Treo mobile phone, but smartphone sales are small compared to the overall mobile phone market.
"(The deal) allows us to address a much larger fraction of the total cellphone market," said PalmSource CEO David Nagel.
"We're bringing the Palm look and feel to a broader range of phones."
He also said the purchase would allow PalmSource to sell its software to makers of cheaper mobile phones in international markets other than China.
PalmSource plans to integrate elements of its organiser software with China MobileSoft's technology to build its address book and calendar features into mass market phones.
Nagel did not give a timeline for the integration or which markets he expects to sell China MobileSoft's technology beyond China.
"Any strategy that will expose the investment PalmSource has made to the broader world of mobile phones is a positive thing," said IDC analyst Alex Slawsby. "But they are going to have to compete with the flashy, multimedia-friendly phones that dominate that part of the market.”
PalmSource said China MobileSoft has also been developing a version of the Linux operating system for mobile devices, which the company intends to use to extend the Palm operating system to more mobile phones users.
PalmSource will add about 150 employees, the majority of whom are engineers, through the deal.
PalmSource said the deal is expected to close by the end of its fiscal third quarter in February, subject to approval by China MobileSoft shareholders.
PalmSource shares slipped on Wednesday to $14.20, off 20 cents. Earlier the stock hit a 52-week low of $14.07.