Mountain View, Calif.-based Bluelark, which has 11 employees, makes a Web browser and other Internet software for the Palm operating system. Handspring's devices run on the Palm OS.
Handspring, which is making its first acquisition, said it will buy privately held Bluelark for up to 450,000 shares of its stock. Handspring's shares closed Tuesday at $35.88, valuing the deal at $16.1 million.
Bluelark will mark its first anniversary in January.
Its browser, known as Blazer, is designed to display content using a variety of standards including Wireless Application Protocol (WAP), HTML and cHTML. Initially, Handspring intends to bundle Blazer with its VisorPhone module beginning next year.
Using Blazer, people type in a standard Internet address and the information is automatically reformatted by a server to fit on the smaller screens of a handheld computer, a process known as dynamic transcoding.
"The user is not aware of that and they do not see it," Handspring senior vice president Ed Colligan said in a conference call with reporters. Blazer "takes care of the formatting."
Handspring is focusing its development efforts on several areas, including on improving wireless Internet access on its Visor handhelds, Colligan said.
"We believe that the next three to five years that 50 to 70 percent (of handhelds) will have some kind of wireless capability," Colligan said. "We're building our capabilities over time."
Another key area is improving the messaging abilities of the Visor, Colligan said, adding that the company had no specific plans to announce yet. Palm has already said it plans to offer instant messaging, notification of new emails and synchronization with corporate email servers in a future version of the Palm operating system.
Handspring is evaluating Palm's approach as well as other possibilities for improved messaging, Colligan said.
The Bluelark deal, which is anticipated to close in the first quarter of 2001, is subject to approval by Bluelark shareholders and to certain other conditions. The deal is not expected to have an effect on Handspring's near-term sales or earnings, chief financial officer Bernard Whitney said.
Technically, Handspring is buying Bluelark for 430,000 shares. However, if the deal is worth less than $22 million based on Handspring's share price in the 10 days prior to the deal's close, Handspring will give Bluelark an additional 20,000 shares.