Palm expected to name new CEO

Bradley, a former Gateway executive and president of the hardware group, has emerged as the top candidate in the six-month search, according to sources close to the situation.

The company plans to announce its choice for chief executive June 25, the same day it is scheduled to report earnings, interim CEO Eric Benhamou told Palm employees at a companywide meeting last month.

A Palm representative declined to comment.

The change comes at a critical time for Palm. The company is looking to avoid a repeat of last year's woes, when slowing sales and a botched product transition led to a glut of inventory, sparking a price war. Palm is again faced with slowing sales, although company executives and board members say Palm is far better equipped--with Bradley and his recent recruits at the helm--to weather the storm.

"He's done a great job improving the operations of the company," said Kontiki CEO Mike Homer, a member of Palm's board.

Susan Swenson, board member and president of Leap Wireless, echoed the sentiment. Bradley "is really a committed executive and has brought in some terrific people," she said.

Although the board hired a recruiting firm and interviewed a number of outside candidates, Bradley has won favor with the company's board of directors for his no-nonsense style and discipline--attributes that have helped him turn around a company mired in troubles just a year ago.

Bradley joined Palm as chief operating officer of the hardware division, but was promoted to president of the hardware unit in May as a sort of trial run as top executive.

Bradley would become the sixth person to lead the company--not counting founder Jeff Hawkins, who hired Donna Dubinsky as Palm's first CEO a decade ago. The company has gone through a number of business transitions, operating first as an independent start-up and later as a unit of US Robotics and 3Com. It was eventually spun-off as a public company.

David Nagel will continue as CEO of PalmSource, the company's operating system subsidiary, while Bradley takes the reins of the hardware unit. Benhamou will continue to head both units under the banner of Palm, until the groups are split later this year.

Benhamou has been interim CEO of the company since Palm replaced former CEO Carl Yankowski in November.

Yankowski's ouster came after a brutal year, when sluggish demand and internal troubles turned the company from a profitable powerhouse struggling to meet demand to a money-losing company faced with a staggering inventory glut.

Although Palm's stock has continued to languish and the company is once again faced with slowing sales, Bradley has won praise from analysts.

"I think he has done a good job of getting the company back on track," said William Crawford, an analyst at Wall Street brokerage house US Bancorp Piper Jaffray. "The company is executing better than it has in a long time, although I think that the credit for that can be shared between Benhamou and Bradley."

Swenson and Homer both said that despite continued economic woes, Palm is in far better shape than when Bradley joined the company a year ago.

"Instead of a lot of ideas that sound great, there is a shorter list of priorities," Swenson said. "The house is in order."

However, Palm faces challenges beyond just a slow economy. The company has been criticized for being slower to innovate than rivals, including Sony and Handspring, which base their products on Palm's operating system.

"The economy is partly a problem, but it's also a lack of innovation," said Kevin Burden, an analyst with research firm IDC. "Bradley's potential promotion means that they really believe that it has more to do with the economy than the lack of innovation."

But, unlike an outside candidate, Bradley can hit the ground running, something analysts say is important both given Palm's current sales slump as well as the fact it is looking to split its software and hardware units.

"He has been initiated," said CIBC World Markets analyst Eddie Woo. "He understands how both parts of the company work."

News.com's Richard Shim contributed to this report.