Palm to acquire wireless software company

Palm said on Wednesday that it plans to buy New York-based ThinAirApps, a privately held company whose software allows secure wireless access to corporate e-mail and other critical business data. Santa Clara, Calif.-based Palm said it will pay $19 million in stock and expects the deal to close by the end of this year.

The move follows Palm's failed bid earlier this year to buy Extended Systems, which has its own server-based approach to providing access to corporate data on handhelds and other wireless devices. That deal collapsed after a steep drop in Palm's share price, which led both sides to call off the acquisition.

The handheld company had promised that it would deliver a handheld with "always on" access to corporate e-mail this year. However, despite winning regulatory approval for such a device, Palm has delayed its introduction until early next year.

Palm said ThinAirApps will become part of its "solutions" group, the part of the company that makes and sells Palm-branded handhelds. By year's end, Palm plans to create a separate subsidiary for the unit that develops and licenses the Palm operating system.

"With this move, we've got a great answer for enterprise-class e-mail, one of the most important requirements for the enterprise community," said Todd Bradley, chief operating officer of Palm's solutions group. "This is a major accomplishment toward our enterprise strategy, the first of many important steps you will see from Palm in this area."

The acquisition, combined with Palm's earlier purchase of Actual Software, will give the handheld maker both the server-based and handheld-based software needed to provide corporate e-mail on its new wireless devices, according to Bradley.

Palm has been working with ThinAirApps over the last year to develop the server software to make that next-generation wireless device a reality.

Although Palm already had a license to use ThinAirApps' technology, Bradley said that Palm will gain valuable intellectual property and skilled engineers by accquiring the company outright.

"We see lots of benefits in owning that IP," Bradley said, referring to intellectual property.

Bradley added that Palm still has more work to do in order to help companies get wireless access to data on their handhelds.

"Clearly this jump-starts us from where we are," Bradley said. Regardless, Bradley added that this area remains one in which Palm could potentially make another acquisition.

Offering ready-to-go options for businesses is seen as critical to getting companies to buy large numbers of handhelds for their workers. The push for the corporate market has also become a key battleground with Microsoft and its Pocket PC operating system. Palm OS licensee Handspring also recently stepped up its efforts aimed at corporate customers.

Palm said it expects most of ThinAirApps' employees to continue with Palm, including the software maker's engineering team.

Last week, an unnamed investor provided Palm $50 million in financing though a convertible bond. In recent weeks, Palm has also seen the departure of CEO Carl Yankowski and another round of layoffs.