"Palm Accelerates Mobile and Wireless Strategy With Acquisition of Extended Systems"
"Strengthens Multiplatform Enterprise Solutions; Creates Market-Focused Business Groups
SANTA CLARA, Calif., March 6, 2001 /PRNewswire/ -- Palm, Inc. (Nasdaq: PALM - news), a leading provider of handheld
computers, today executed on another leg of its mobile and wireless strategy with a definitive agreement to acquire
Extended Systems Incorporated (Nasdaq: XTND - news), a leading mobile solutions vendor in the enterprise space.
This strategy takes Palm beyond its traditional strength serving individual users, to encompass enterprise solutions.
Extended Systems' product offerings represent the ``glue'' that binds the wealth of enterprise applications with easy-to-use
handheld computers, which can now be managed by corporate information officers (CIOs).
Under the terms of the definitive agreement, Extended Systems' stockholders will receive shares of Palm valued at $22 per
Extended Systems' share, subject to a collar described below. The transaction values Extended Systems at approximately
$264 million on a fully diluted basis.
Importantly, this acquisition will make Palm a unique vendor that can provide both handheld computers and
enterprise-class mobile infrastructure software and support for multiple operating systems, including Palm OS, Pocket PC,
Windows CE, EPOC, and RIM. This comprehensive, behind-the-firewall solution supports groupware and business
applications -- enhancing overall organizational productivity and controlling costs.
In a related move to sharpen customer focus, Palm created three strategic business groups -- the Enterprise Solutions
Group, the Individual Solutions Group, and the Platform Solutions Group.
``Palm intends to be as popular with CIOs as it is with individuals,'' said Carl Yankowski, Palm's chief executive officer.
``Palm will be unmatched in its ability to deliver information to individual users and large organizations using a Palm solution
or any mobile operating system or handheld device.''
``Extended Systems and Palm share a vision and have complementary products and culture. Together we significantly
strengthen our ability to serve the needs of the explosive enterprise market,'' said Extended Systems CEO, Steve Simpson.
``This move is a natural evolution as we join to create one end-to-end solution from a single vendor. It's a win-win for
customers, employees and stockholders.''
Extended Systems' prominence in the mobile enterprise market strengthens Palm's position, and brings Palm the
opportunity to enhance its handheld device business, and, for the first time, sell mobile infrastructure software, services and
support. Noted analysts project that the server sync segment of the enterprise market alone could exceed $1 billion by
2003.(1) These new revenue sources also provide high margin business opportunities for Palm.
In addition to Extended Systems' mobile data management and Bluetooth wireless connectivity products, the acquisition
will provide Palm with a strong engineering staff experienced in the enterprise market, as well as a worldwide sales force,
strategic partners, and a large installed base of enterprise customers -- including British Airways, International Paper
Company, Cadbury Schweppes, Daimler Chrysler, and Orange.
Under the terms of the agreement, Extended Systems' stockholders will receive a number of Palm shares based on the
average closing price for Palm for the 10 trading days ending two business days prior to the Extended Systems'
stockholders' meeting. If the average closing price of Palm stock is between $16.60 and $22.00 per share, Extended
Systems' stockholders will receive a number of shares equal to $22.00 per share divided by the Palm average closing
price. If the average price is at or above $22.00, Extended Systems' stockholders will receive one Palm share for each
Extended Systems' share; if the average price is at or below $16.60, Extended Systems' stockholders will receive 1.325
Palm shares for each Extended Systems' share. Palm will account for this transaction using the purchase method of
accounting. The transaction is subject to regulatory and Extended Systems stockholder approvals, and is expected to close
in June 2001.
Benefits to Stakeholders
The acquisition of Extended Systems provides Palm with key assets that advance Palm's enterprise leadership goals. Palm
believes its ability to provide CIOs with an end-to-end mobile services infrastructure will accelerate the rate of enterprise
adoption.
Extended Systems gains critical value-add elements for its enterprise customers -- including applications, devices and
mobile and wireless expertise. Extended Systems also benefits from Palm's deeper relationships with alliance partners,
brand strength, marketing power, and financial resources. Together, the companies can deliver a single, comprehensive
solution for the enterprise. This will simplify work for CIOs by providing them with widely used tools to deliver mobile and
wireless access to the multitude of handheld devices -- of any type -- in their organizations.
Palm's strategic partners and the more than 145,000 registered developers that support the Palm Economy will benefit
from Palm's increased focus on large organizations. Palm plans to extend the Palm platform and establish a new set of APIs
for behind-the-firewall enterprise services.
Individuals who use their Palm handheld devices at home and work will benefit from more services and applications, as
broad synchronization and infrastructure standards spread from enterprises to ISPs and portal providers.
Extended Systems, based in Boise, Idaho, employs approximately 380 individuals worldwide. For the second quarter
ended December 31, 2000, Extended Systems reported revenue of $13.9 million and a net loss of $1.6 million or $0.15
per share. Revenue from mobile information management (MIM) software for the second quarter was $6.4 million, an
increase of 69 percent over MIM software revenue in the same quarter of the prior year.
Extended Systems is a leader in data synchronization and management and wireless connectivity technologies. Extended
Systems and Palm are active members of the Bluetooth SIG. Extended Systems has licensed Bluetooth software to leading
mobile device manufacturers including Palm, 3Com, Motorola, Hewlett-Packard Company, Fujitsu and Xircom. Currently,
Extended Systems has Internet and print server businesses; however, Extended Systems plans to exit those businesses and
focus on the enterprise technology solutions previously described.
Strategic Business Groups Increase Customer Focus
To better embrace the much larger enterprise team gained through the acquisition, and focus the appropriate resources on
all its customers, Palm has aligned its organization's structure around three new business groups, effective immediately.
The Palm Enterprise Solutions Group (ESG), which will incorporate most Extended Systems employees as well as Palm's
current Enterprise Market Segment organization, led by Jerry Jalaba, will be managed by Extended Systems President
Steve Simpson, as general manager when the transaction closes. Until that time, Jalaba will continue in his current role in
Palm Enterprise management. ESG will be responsible for all Palm's enterprise solutions, including the new mobile services
infrastructure business.
The Palm Individual Solutions Group (ISG) includes Palm's primary solutions (handheld devices, content, and mobile and
wireless access). It is responsible for Palm's handheld products for individuals, such as consumers, students, and other
professionals. Palm's Chief Marketing Officer Satjiv Chahil leads this group until a permanent general manager is named.
The Palm Platform Solutions Group (PSG) is being managed by Alan Kessler, who already has responsibility for the Palm
OS, licensing and partnerships. He becomes the unit's general manager.
Barry Cottle, who successfully created and incubated Palm's Content and Access, business becomes Palm's Chief Internet
(Net) Officer (CNO), responsible for Internet alliances, reporting directly to Yankowski. He is also responsible for all ISG
marketing, reporting to Chahil.
``The acquisition of Extended Systems lets us fine-tune our organizational structure around a total solutions approach that
focuses on customers,'' said Yankowski. ``This structure will enhance how we interact with all of our customers, and
dramatically improve our ability to execute on our mobile and wireless strategy.''
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