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PalmOne spends $30 million to drop 'One'

A couple of years after Palm became PalmOne, the company has a multimillion-dollar change of heart.

PalmOne, which makes handhelds bearing the same name, plans to change its name to Palm later this year, the company said Tuesday.

At that time, its product line, which currently includes the LifeDrive, Treo, Tungsten and Zire devices, will be branded under the Palm name.

The name change follows an agreement between PalmOne and PalmSource, the software company that was spun off from parent company Palm in October 2003. Following the spinoff, Palm changed its name to PalmOne and continued to concentrate on hardware.

At the time the two companies created a third company, called Palm Trademark Holding, of which PalmSource held a 55 percent stake. That stake will now be transferred to PalmOne for $30 million, the companies said.

PalmOne also renewed its operating system license from PalmSource through 2009 for a minimum royalty of $148.5 million.

The agreement comes amid upheaval at PalmSource. David Nagel, its CEO, resigned Sunday.

PalmSource will charge $2.6 million for the quarter ending June 3 as part of Nagel's severance agreement, the company disclosed on Tuesday in a filing with the Securities and Exchange Commission. Nagel will remain with the company in an advisory role until July 15, after which he will vest his 268,445 remaining shares of restricted stock.

Nagel's severance package is as lucrative as his hefty compensation package, which the company used to lure him away from his job at AT&T in 2001. Under the terms of his employment letter, Nagel received a starting salary of $620,000, a $200,000 hiring bonus, a Palm stock grant and the option to buy a significant portion of the operating system business.

As part of the agreement, PalmOne has granted PalmSource certain rights to Palm trademarks for PalmSource and its licensees for a four-year transition period, but the companies have not said what will happen after that.

A new logo will be unveiled later this summer, said PalmOne. It is not clear whether this will entail changing the current practice of using a lower case "p" and the number "1" in place of the letter "l."

Matt Loney of ZDNet UK reported from London. Reuters contributed to this report.