Palm to split – official

We just don't know how, or when

Palm CEO Carl Yankowski took a step towards resolving the company's Apple-like dilemma today by saying that Palm would rid itself of either its hardware or software business. He just wouldn't say which.

Speaking at the 12th Annual Bear Stearns Technology Conference, Yankowski said one of these two options would be definitely enacted. That's more specific than he's been before. At the last financial update in May, Yankowski admitted Palm was looking at "dramatically changing" its business model.

Back then, he specifically denied Palm was quitting the OS business, although that looks the least painful option now. Palm derives most of its revenue from hardware, and could spin the OS licensing business off into a new, jointly owned company in which it retains an equal, but slightly-more-equal-than-the-others stake.

That's exactly how Psion solved the same dilemma three years ago, when it spun its software division off to create Symbian, with roughly-equal shares taken by Nokia, Motorola and Ericsson. Psion had been shopping its Epoc operating system round to phone manufacturers for some time, with only limited success: it now boasts a clutch of new licensees, and Matsushita is a fourth shareholder. And while Psion itself hasn't exactly flourished since then, it has no one to blame but itself, and certainly not its OS licensees.

Existing PalmOS licensees Sony, Handspring and TRG would be sure bets to take a stake in Palm NewCo, if that's the direction it took. Neither of these could have the same grounds to complain that Palm was reserving OS features for itself, or using the OS to leverage unfairly against them on price.

In a similar dilemma four years ago, Apple simply decided to kill the cloners and withdraw from licensing MacOS, buying out its biggest licensee in the process.

Register Bootlace: Analyst Bear Stearns might ring a few bells with Palmwatchers. Six months ago the company predicted Palm sales would exceed expectations, while Goldman Sachs rated the company a "compelling buy". Since then, Palm stock has fallen from over $65 to trade at around the $5 mark. Financial analysts - doncha love 'em? &reg.

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