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Q&A: PalmSource CEO David Nagel

In the next few months, Palm Inc. will officially separate into two publicly traded companies -- Palm Solutions (hardware) and PalmSource (software). Since announcing the split last year, PalmSource CEO David Nagel has forged ahead with a completely new handheld operating system (OS 5.x), new places to grow (China) and new product opportunities (Fossil's Wrist PDA, Garmin's iQue 3600 GPS-enabled handheld).

Now as he stands at the crossroads, Nagel tells that spinning off is the best thing that could have happened and that he is seriously contemplating the benefits of adding some PalmSource code to the open source community.

Q: What is PalmSource's direction going forward as it separates from Palm Inc.?

Most of the actual separation -- the people and the properties -- has already taken place. We're working though the final details. The board has already made decisions in anticipation of the split. The next formal step is a file what is called a Form 10 with the SEC, which allows us to become a separately traded company, because the strategy is still to do a "spot distribution" for investors. We have not filed that yet. Part of that is market timing and semantics. It should take a couple of months.

Q: Do you see yourself in a better position than say Palm Solutions CEO R. Todd Bradley because you are basically starting a new company?

Being the spinner has psychological advantages, but I think that the actual psychological impact is lessened here because Palm made the choice years ago to license the operating system and because the split was announced last year. We don't start as an underdog - we start as an industry leader.

Palm has been issuing segment data in its earnings reports for the last year, so on the conference call on March 20, you will be able to see fairly well if we are declining in revenue or growing in revenue or where we are in profitability and a get a pretty good year-over-year comparison.

Q: What about the news that Sony chairman and CEO, Nobuyuki Idei is interested in acquiring Palm's software division if it were for sale? Would you sell PalmSource to Sony?

I think that is old news. He said the same thing at the World Economic Forum in Davos back in January. We can't comment on those kinds of rumors. To be honest, I was mostly amused by his candor as the head of a major corporation.

Q: What is the role of PalmSource in non-PDA devices?

Our business model is quite different from Microsoft... and the name says it clearly, Pocket PC represents a reprise of the PC business. It worked great for them in the PC industry. When the industry moves to a new type of product, and we think in the case of handhelds, maybe a new kind of fundamental shift has happened. We have said, instead of everyone building an exact copy of the hardware, we sort of specify that you have to be on our one or two microprocessor family -- either 68K or ARM -- with a strong push for people to adopt ARM as much as possible. Other than that, there is precious little other that you have to do except pass our software compatibility suite to be registered as a 'Palm Powered' device. Because of that, you see a range of devices that you don't see in Pocket PCs.

Q: Does it limit you too much to focus only on battery-powered mobile devices?

Not really. We think that is going to be a nice market. If you throw together all the handheld products of this class, I would put in things like MP3 players and digital cameras and digital devices that have some type of operating system. We also make a distinction between us and other companies in that we are a platform company. We release our APIs and encourage software companies to develop based on those APIs.

Continued on page 2 with: "The Future of PDAs"