PalmSource Looking for Strategic Investors

Posted By: Ed Saturday, August 17, 2002 4:45:14 PM

PalmSource, the operating system division of Palm Inc. is looking for $60 million to $80 million in investment money for when it becomes an independent company, which should happen within the next six months. PalmSource CEO David Nagel told Cnet that his company was hoping to get an amount equal to 9 months to a year's revenue. "We're really talking to a mixture of what I would say are strategic investors -- people that would have either the status of technology partners or perhaps customers -- on the one hand and then strategic financial investors on the other," Nagel said.

As a software company, PalmSource will only need money to pay its employees and rent and do marketing, not pay for parts and inventory as many new companies do, so the amount of start-up cash it needs is fairly modest. Nagel said it has received some investment money from Palm itself and, of course, it makes money from all the companies who pay to licence the Palm OS.

"All of the people that we're talking to are viewing PalmSource as an interesting long-term investment," said Nagel.

Though PalmSource is still a subsidiary, Palm has been working towards making it a separate company for over a year. Last week, PalmSource began moving its offices to Sunnyvale, California while the hardware division of Palm is moving to Milpitas California.

The company has not yet finalized plans for how PalmSource will split off. "We currently plan to either do an IPO or do a stock distribution (to Palm shareholders), which given the state of market is probably in all honesty the more likely course," Nagel said.

Thanks to the many people who sent me tips on this. -Ed

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Buy Palm Stock Now

RobZombie @ 8/17/2002 5:11:55 PM #
> "We currently plan to either do an IPO or do a stock distribution (to Palm shareholders),
> which given the state of market is probably in all honesty the more likely course

However you feel about Palm's hardware, buy some Palm stock now and some PalmSource stock will arrive in your mailbox in a few months. You can dump the Palm stock at that point if you want but I think this is a great time to get in on the ground floor at PalmSource at bottom basement prices.

RE: Buy Palm Stock Now
I.M. Anonymous @ 8/17/2002 6:41:26 PM #
Palm currently makes about $8.00 for each handheld manufactured using the palm license agreement. If one million Palm OS handhelds were sold each year, that's only eight million bucks income. Now, if every man, woman and child in the US purchased a Palm OS handheld every year for the next decade, the company would look like a great bargain. As is, it only has marginal intellectual resources and a declining income stream. Therefore, the "ground floor" is likely exactly where the stock is heading. I wish it were otherwise.

JBH

RE: Buy Palm Stock Now
I.M. Anonymous @ 8/17/2002 6:51:27 PM #
> "We currently plan to either do an IPO or do a stock distribution (to Palm shareholders), which given the state of market is probably in all honesty the more likely course.

Another IPO or distribution? Sheesh. How many times can you split a hair? How much more can they dilute this company? They just keep cutting up the corpse into smaller and smaller pieces and selling them off.

RE: Buy Palm Stock Now
I.M. Anonymous @ 8/18/2002 3:01:27 AM #
> Palm currently makes about $8.00 for each
> handheld manufactured using the
> palm license agreement. If one million Palm OS
> handhelds were sold each year, that's only eight > million bucks income.

Your estimate is way, way off. PalmSource's revenue for last *quarter* was $18.7 million. Assuming that's an average quarter, multiply by four quarters in a year to get roughly $75 million.

Palm and PalmSources quarterly results:
www.palminfocenter.com/view_Story.asp?ID=3716

RE: Buy Palm Stock Now
LarryGarfield @ 8/18/2002 5:47:29 AM #
> Palm currently makes about $8.00 for each
> handheld manufactured using the
> palm license agreement. If one million Palm OS
> handhelds were sold each year, that's only eight > million bucks income.

That's under the old Handspring license agreement. The licensing costs for OS 4 and up are much higher, and based on a different model, too. It cuts out a lot of smaller companies, but is much more in line with making PalmSource financially sound all on its own.

--
This post is ROT26 encrypted. Reading it is a violation of the DMCA

RE: Buy Palm Stock Now
I.M. Anonymous @ 8/18/2002 10:43:05 AM #
>"That's under the old Handspring license agreement. The licensing costs for OS 4 and up are much higher, and based on a different model, too."

Sir Larry - what is it then? OR are you just blowing smoke?

Sony will jump on that

I.M. Anonymous @ 8/17/2002 5:10:26 PM #
Sony has the capital to loan Palm Source the $$ and in return have a major influence on the direction the OS is going.
RE: Sony will jump on that
I.M. Anonymous @ 8/17/2002 6:14:50 PM #
That's probably the most likely outcome. Sony may not buy them outright but enough of it to have their influences. And at these prices it's a bargain. What % of the shares would be enough to have real influences? Obviously 50%+1 share will do it, but if you don't want totally control it just "influence" it.
RE: Sony will jump on that
I.M. Anonymous @ 8/17/2002 6:39:52 PM #
And if Sony waits just a little bit - Palm is bancrupt and Sony (or anybody else) gets it for free - If you read Nagels comment between the lines.

Nagel is (rarely enough) refreshing clear in his statement. What he says boils down to: Either some stupid stumbles in with a spare 80 million bucks, without asking stupid questions, or we have to turn the light off.

If you ask a sober man, not blinded by the zen of Palm singsong - the latter is happening.

RE: Sony will jump on that
I.M. Anonymous @ 8/17/2002 8:04:25 PM #
The day Sony has "a major influence on the direction the OS is going" is the day I jump ship and get a Zaurus or something else. Sony knows very little about developing operating systems.
RE: Sony will jump on that
I.M. Anonymous @ 8/17/2002 8:09:07 PM #
Palm (including PalmSource) is an old sick horse that refuses to die.

Why on earth would SONY!!! buy such a company. Sony can develop their own OS or use PPC 2002.

Palsource is history.

RE: Sony will jump on that
I.M. Anonymous @ 8/17/2002 10:11:58 PM #
"The day Sony has "a major influence on the direction the OS is going" is the day I jump ship and get a Zaurus or something else. Sony knows very little about developing operating systems."

Well don't forget to take your life-vest, Sony already has a hand at steering the Palm platform in the direction from being just an organizer to a multi-media, multi-functional PDA.

Like it or not, Palm was just a fancy organizer before handspring and Sony licensed the OS. Recently, Sony has pushed the OS to the max of it's capablities.

RE: Sony will jump on that
I.M. Anonymous @ 8/18/2002 1:21:23 AM #
Sticking a hardware MP3 decoder in a device has absolutlely nothing to do with pushing the OS. Sony clearly makes some fancy devices hardware-wise, but please know what you're talking about before making silly claims about operating systems. I suppose in your mind, since Sony makes some fancy laptops, they push the Windows OS too.

RE: Sony will jump on that
I.M. Anonymous @ 8/18/2002 8:28:37 AM #
sony knows nothing about developing OSs?

At least my Playstation does not lockup every time I run it like my desktop does.

How about Cameras? native Japanese PDAs? CD players? DVD and VCRs? They all have OSs. Unlike those from Microsoft (for the most part) they at least work. No one wants to throw their TV out the Window. But EVERYONE who uses a computer has at one time or another, because Microsoft's OS so often simply does not do what it is supposed to do.

RE: Sony will jump on that
I.M. Anonymous @ 8/18/2002 9:42:22 AM #
If you look inside each of those devices you mention you'll find OS's that were not developed by Sony. Sony are great at taking someone else's work and wrapping it in tacky surrounds, then rev'ing those box designs every 3 weeks.
RE: Sony will jump on that
I.M. Anonymous @ 8/18/2002 1:25:43 PM #
"Sticking a hardware MP3 decoder in a device has absolutlely nothing to do with pushing the OS. Sony clearly makes some fancy devices hardware-wise, but please know what you're talking about before making silly claims about operating systems. I suppose in your mind, since Sony makes some fancy laptops, they push the Windows OS too."

Please know what I'm talking about?

Here's what I'm talking about:

What Palm has done with their OS 4.0 machines:
1. 16-bit color... wait they got that from Handspring!
2. VFS support for external cards...again wait... they got from Sony!
3. Same 160x160 resolution that has been carried over from OS 3.5, OS 3.0, OS 2.0 in other words no change!
4. 16mb for internal memory support...hold on didn't Handspring do that first?
5. 33mhz processor support... wait Handspring was again first.

What Sony did with their Palm OS 4.0 machines:
1. x4 the resolution with 320x320 color screen by using a separate graphics chip to work with the OS to handle the increase resolution and color.
2. enable mp3 playback by again incorporating another DSP chip to work with the OS to allow mp3 playback AND PDA functioning.
3. improve the screens especially the NR and T 665 series.
4. built in speaker to play music and sounds other than "beep-beep"
5. incorporated a virtual graffti system (again Handera first the first to offer the virtual graffti not Palm)
6. Allow expanded viewing from 320x320 high resolution to 320x480 high resolution on the NR models
7. Incorporated a 66mhz processor to their high-end models.
8. Incorpporated a jog-dail and back button into their units.

I think that these add-on certainly "push" the OS.

RE: Sony will jump on that
I.M. Anonymous @ 8/18/2002 2:31:10 PM #
That's a lot of text to name VFS as the only obvious thing that Sony has added to the OS.
RE: Sony will jump on that
I.M. Anonymous @ 8/18/2002 4:58:34 PM #
This "That's a lot of text to name VFS as the only obvious thing that Sony has added to the OS."

Should read "That's a lot of text to name VFS *AND INCREASED RESOLLUTION, SOFT GRAFITTI, mp3,* as the only obvious thing that Sony has added to the OS."

Actually all the things that got me from the PPC camp to the Palm OS one.

RE: Sony will jump on that
I.M. Anonymous @ 8/18/2002 6:15:43 PM #
You two actually agree with each other, you are just using different terms to describe the same thing so you aren't understanding each other. Sony has added great features to the Palm OS PLATFORM, like MP3 players, hi-res, and all that. They haven't added them to the operating system.

Sony's strength is in developing good, innovative hardware. AFAIK, they have never tried their hand at operating systems, preferring to licence them from other companies.

RE: Sony will jump on that
I.M. Anonymous @ 8/18/2002 8:08:42 PM #
Adding hi-res support, needs new API's, and modification to the OS. The OS doesn't support Virtual Grafiti or hi-res both need modification. The OS doesn't support speakers/graphics chips. You need to modify...etc
RE: Sony will jump on that
I.M. Anonymous @ 8/19/2002 12:14:34 AM #
Palm has over a quarter billion $$$ in cash. Even losing money, that should last them a couple years. Enough time to fully spin off PalmSource. Once PalmSource is spun off, it doesn't matter whether Palm or Sony pays the most or least in PalmOS royalties, PalmSource ain't goin' under. They won't have any major liabilities; and in today's post-Enron climate, their IPO most probably won't be padded with any monster executive salaries.

To prevent some hostile take-over, they might even have PalmSource spin-off Palm Solutions (give the hardware group the new stock ticker), instead of vice-versa. Then PalmSource would get a big tax write-off if Palm doesn't get their act in order, an important option if they want to Micro$oftize their books.

RE: Sony will jump on that
I.M. Anonymous @ 8/19/2002 3:28:39 AM #
"Palm has over a quarter billion $$$ in cash. Even losing money, that should last them a couple years. Enough time to fully spin off PalmSource."

Dude, did you even read the article?

WE are not the ones saying Palm or PalmSource needed money. The head of PalmSource said that they needed $$. We are just debating where that money will come from.

what about good ol' apple?

I.M. Anonymous @ 8/17/2002 7:11:05 PM #
i know this rumor has been around before, but apple may not be a bad palm os partner either. they have done the handheld thing beore, they have a handwriting recognition software, GUI experience and they have cash available....
RE: what about good ol' apple?
I.M. Anonymous @ 8/17/2002 7:59:10 PM #
Would be nice. Apple and PalmSource could make a great team.
If this happens M$ will take advantage of the situation
I.M. Anonymous @ 8/17/2002 8:12:22 PM #
I don't think this is a good idea. Apple will scare off many Windows users, and the majority of palm OS users use Windows (that's why Sony eliminated mac support).

No ofense to MAc but there are many Windows users (average joes not geeks like us) that see Apple as something bad.


People will relate Palm OS with Machintosh. If this happens M$ will use some sort of strategy to make Joe six pack think that Palm OS handhelds are for Mac users only.

RE: what about good ol' apple?
I.M. Anonymous @ 8/17/2002 8:47:26 PM #
Even a layman knows Steve Jobs opinion: If he hates on thing on earth, its a handheld PDA.
He has said this openly about a trillion time.
Why not go for reality Palmsource is dry of capital and therefore there history before it began.
How Apple/Jobs thinks...
I.M. Anonymous @ 8/17/2002 10:18:28 PM #
If Apple buys into PalmSource, they won't settle for any less than 51%. Jobs dosen't share well (See:"Common hardware Refrence Platform", or more appropriately, how Jobs drove a stake through it. Also, the level of control that he exerted on NeXT development/hardware.), and his first step would probably be to pull the licencing of the OS from everybody he could - He's too entrenched on the idea of fighting to maintain, and not to win.
I can't see Apple having any interest in OS 4, though. They MIGHT bite on OS5, but it hasen't even seen the light of commercial day yet - Why buy a whole company for a Mystery OS?

Now, on the other hand, if Bill was to hand some money to an interested/skilled third party, that person could go in and all but drive Palm into the ground by scattering their resources on bizzare projects and destroying investor confidence by making wishy-washy statements to the press. Hell, they've probably spent more than this on PPC advertising in the last two years.

Or did that happen already? I'm not sure.

RE: what about good ol' apple?
I.M. Anonymous @ 8/18/2002 1:56:00 AM #
> I don't think this is a good idea. Apple will scare off many Windows users

Just like Microsoft dumping a bunch of money into Apple scared off the Mac users? There's absolutely no reason why the general public would even know about Apple dumping some money into PalmSource.

Apple will definitely scare Windows Users.
I.M. Anonymous @ 8/18/2002 6:58:58 AM #
When Microsoft invested money in Apple no one knew, but if Apple invest in Palm M$ is going to take advantage of that.

I can see M$ advertisements:

Can your Apple powered Palm do that?

This for sure will trik people into beleving that Palms offer only compatibility with Apple computers or that the Palm OS is a scaled down version of MAc.

RE: what about good ol' apple?
I.M. Anonymous @ 8/18/2002 9:18:16 AM #
Forget about it. Apple makes the iPod which is already halfway to being a handheld. As soon as they add a way to do text input it will be a full-fledged Palm competitor. Don't know how serious a competitor it will be because developer support is really important and there's no way to judge that now. But Apple won't be buying into PalmSource. If they wanted to do that, the iPod would already run the Palm OS.
RE: what about good ol' apple?
I.M. Anonymous @ 8/18/2002 1:05:13 PM #
Ya know, an OS X GUI wouldn't be bad for OS 6.

It's obvious that Jobs doesn't share well; he makes the hardware and software for his company. You are right, everything must be his way or no way.

Why does Jobs not want an Apple PDA/OS?
I.M. Anonymous @ 8/18/2002 3:05:39 PM #
>"Even a layman knows Steve Jobs opinion: If he hates on thing on earth, its a handheld PDA."

Why does Jobs not want an Apple PDA/OS? Not enough margins????

I think it would make complete sense to offer an iPad PDA with an OS X type GUI/OS.

Is Jobs afraid of margins? What about iPod? I think even if they don't make much money on the PDA, they could market more Mac's through using the iPAD PDA as their new "digital hub" of the Apple Experience.

RE: what about good ol' apple?
I.M. Anonymous @ 8/18/2002 4:54:46 PM #
I think it would be cool if Apple invested in PalmSource. Hell, alot of Palm employees are formerly
Apple employees, or was developing for Apple.
RE: what about good ol' apple?
I.M. Anonymous @ 8/18/2002 8:26:21 PM #
I'd rather see all exisiting Palm Source managment and engineers dissapear and Sony or Apple people come in and get things done. The OS is moving waaay to slow for the market they are in.
RE: what about good ol' apple?
I.M. Anonymous @ 8/18/2002 10:07:44 PM #
What really happened is even better. The executives who were responsible for the slow development were all fired last fall. That's why OS5 has been finished and OS6 is coming this winter.
RE: what about good ol' apple?
I.M. Anonymous @ 8/19/2002 1:42:09 AM #
...Why does Jobs not want an Apple PDA/OS? Not enough margins????....

Besides Palm is not heading for profitibility but in free fall: your uninformed.
Job statet cool after he was asked why no nes Newton "our market research found after investigating - PDA is a bad user-experience to day".

Like it or not - the Palm produced today is stoneage. Excepf tor the few techies on PIC...

Be saves the day.

I.M. Anonymous @ 8/17/2002 10:51:42 PM #
The only scenario that will save this whole mess.

Right after the introduction to that Oslo, Palm shows a preview of the OS 6.0 in all it's glory, and promise it will be out within 3 months.

voila. Everybody breaths sight of relief. Palm users cheers. Customer ogling over the new OS preview and actually might buy the OSLO after all.

This will show Wallstreet that Palm is not a loser afterall, that they can make a "real" OS, and there is hope with that Be OS acquisition.

This deal has to be done by March and the Beta out by Summer next year, or Palm will be over and forever be a 5% niche market gadget maker.

RE: Be saves the day.
I.M. Anonymous @ 8/18/2002 12:51:16 AM #
Or sales stagnates becuase everybody decides to wait for OS6 devices.. like they are waiting for OS5 devices now.

When does it end?

RE: Be saves the day.
I.M. Anonymous @ 8/18/2002 1:11:41 AM #
Be is not going to save the day. OS 6.0 is not what is going to save PalmSource. PalmSource needs to get more devices shipped, period!
RE: Be saves the day.
I.M. Anonymous @ 8/18/2002 1:46:33 AM #
> show Wallstreet that Palm is not a loser afterall,
> that they can make a "real" OS

OS 5 is a real OS. What exactly are you looking for?

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