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Palm creates separate board for OS unit

As it moves ahead with plans to split in two, the handheld maker is expected to announce that it has formed a separate board of directors for its operating system subsidiary.

In another sign it is moving ahead with plans to split in two, handheld maker Palm is expected to announce Monday that it has formed a separate board of directors for its PalmSource operating system subsidiary.

The five-member board will be chaired by Eric Benhamou, Palm's chairman and current interim CEO, according to a source familiar with the company's plans. Also on the board will be PalmSource CEO David Nagel, former Palm Chief Marketing Officer Satjiv Chahil, former 3Com President and Informix CEO Robert J. Finocchio Jr., and former Be CEO Jean-Louis Gassee. Palm acquired the assets of Be last year.

Gassee, who was a top executive at Apple Computer before starting Be, is currently CEO of Computer Access Technology.

The creation of the new board comes as Palm plans on Tuesday to announce that Todd Bradley, president of its hardware operations, will become that unit's CEO. In related news, Palm cut an undisclosed number of jobs last week in its hardware unit, with the many of the cuts coming in the finance department.

Creating a separate board for the OS unit is part of a plan that Palm ultimately hopes will lead to the creation of two separately traded public companies. The company is looking to achieve some kind of external separation this year, through either an initial public offering, a spinoff to shareholders with outside investment, or a straight spinoff to shareholders.

The second option is looking most likely, given the tepid market for IPOs and the need for Palm to raise additional cash through the split.

When Palm separates into two companies, analysts and board members say the company will be able to do a better job of recruiting licensees for its operating system by ensuring that Palm's hardware side does not have an unfair edge over other companies that license the OS.

Palm is also struggling to work through a second straight spring of slow sales. The company warned last month that sales for the past quarter and current quarter will fall well short of estimates amid sluggish demand.