Palm and Handspring shares bounce on merger talk
By Scott Morrison in San Francisco
Published: November 19 2001 18:33 | Last Updated: November 20 2001 01:47
Shares in Palm and Handspring, the handheld computer makers, jumped on Monday amid speculation that the two companies might merge. Handspring, however, denied the companies were negotiating a deal and Palm and Handspring shares slipped back just before close of trading.
Shares in Handspring rose as much as 50 per cent in early trading on Monday, but slipped after the company's denials to close up $1.41, or 35 per cent, at $5.41. Palm shares were up as much as 18 per cent before closing up almost 13 per cent to $3.87. These gains followed large gains on Friday, when Handspring climbed 21 per cent to $4 and Palm shares rose 18 per cent to $3.43.
The companies have been engaged in a fierce price war this year in a bid to bolster unit sales during a period of slumping consumer demand.
Mounting losses and plunging share prices have left many observers questioning whether the two companies can survive as independents. A merger would enable the combined group to cut costs while focusing on developing new products.
Carl Yankowski, Palm's chief executive, resigned unexpectedly on November 8.
Palm controls 52 per cent of the market and has a much stronger brand name, which would fare much better against handheld products from companies such as Hewlett-Packard, Compaq Computer.
Meanwhile, Handspring has developed a significant lead with its new generation of hybrid wireless devices, which feature a handheld computer and a mobile phone, as well as web browsing and always-on e-mail capabilities.
Palm and Handspring are linked in numerous ways. In addition to slugging it out in the same market, they both depend on the Palm operating system, which accounts for about 80 per cent of the handheld market.
Slumping sales and losses have sent shares of both companies tumbling this year.
Most significantly, Palm developers Donna Dubinsky and Jeff Hawkins left the company in 1998 to found Handspring after they were not able to convince parent company 3Com to spin off Palm as a separate company. Palm was spun off from 3Com soon after their departure.