Palm plans to split hardware, software divisions

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Though they're in no talks with any other firm about buying the company, Palm eventually plans to separate its hardware and software divisions, CEO Carl Yankowski said at the Bear Stearns technology conference.

He also said that the company has plenty of cash to fund operations and won't be running out of money in the near future, as some analysts had predicted. Still, the company is facing tough times. On March 28, Palm said that its revenue for the third quarter rose to US$470.8 million, up 73 percent from the same quarter last year. However, concerned about the current economic downturn, the company announced plans to reduce its workforce and trim operating expenses by up to 15 percent.

With all its problems, rumors have been rampant that either Apple or IBM might buy Palm. (There's also the rumor that Apple might buy Handspring.). However, Bear Stearns analyst Andrew Neff told Reuters that while any number of scenarios could link Palm with another company, the fact that Palm was spun off from 3Com last year could be a barrier to a deal.

"For tax reasons, it becomes more expensive to acquire them for the first two years" after the spin-off, Neff said.

During a conference call after the dire announcement, Yankowski refused to outline the alternatives Palm is considering.

If it does split off, as the CEO said, the part of the company that develops and licenses the operating system from the business that makes and sells Palm-branded devices, there are dangers. In Palm's case, over 95 cents out of every dollar of revenue comes from sales of its devices, according to CNET. And the company gets far less for each handheld that uses its operating system than Microsoft gets for each PC that uses Windows, the story adds.

CNET also points out that Palm could scale back its business in which it tries to be both portal and Internet service provider to customers with wireless Palms. Or the company might even stop licensing the Palm OS to other companies. Such a move would certainly hurt Handspring and Sony, which make Palm OS based devices. But it's been done before. After all, Apple briefly licensed its operating system for other companies to include in Mac clones. But Apple CEO Steve Jobs killed that practice, in effect killing the clones along the way.

This story, "Palm plans to split hardware, software divisions" was originally published by PCWorld.

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