Handspring devices: Joining the Palm stable

Palm said on Wednesday it had agreed to buy Handspring in an all-shares deal worth about $168.9m (�101m ; 135m euros).

The deal is expected to go ahead in the autumn, once Palm has floated its software business PalmSource on the Nasdaq stock market.

News of the acquisition pushed shares in both companies sharply higher, with Palm climbing 8% to $13.15 and Handspring rising 14% to $1.29.

The tie-up comes amid a sharp downturn in sales of handheld computers as blue chip corporations slash their technology budgets.

Dwindling sales

According to market monitors International Data Corp, global sales of handheld devices, or personal digital assistants (PDAs), fell by 21% in the first three months of the year.

Palm and Handspring both turned in a loss in their latest financial quarters, and are expected to lose money again in the next three-month period.

Todd Bradley, chief executive of Palm's PDA unit, described the acquisition as a "merger of leaders," and said it was "the best formula to expand our young, promising markets".

Combining the two companies will lead to about 125 job losses, and will generate about $25m a year in cost savings, Palm said.

Mr Bradley will retain the chief executive role after the deal has been completed.

The acquisition will also reunite Palm with its founders; Handspring chief executive Donna Dubinsky, and its chairman, Jeff Hawkins.