Palm Buys Perpetual License for Palm OS

In an ironic move, Palm Inc. is paying $44 million for a perpetual license to the Palm Garnet operating system...which it used to own.

Palm Inc. has announced it is paying $44 million to Access Systems Americas (formerly PalmSource, Inc.) for a perpetual license to the source code for Palm OS Garnet, the version of the Palm operating system used in several Palm handheld computer and smartphones, including the entries in the company’s Treo line which aren’t running Windows Mobile. And here’s a neat trick: Palm isn’t making any additional license fees over time, and the company won’t be paying a cent until its third fiscal quarter of 2007, at which pont it will make a single payment to Access Systems which will be expensed out over the next several years.

“This agreement gives Palm increased ability to innovate on the Palm OS Garnet base, and to effectively differentiate Palm products long into the future,” said Mark Bercow, Palm’s senior VP of business development. “We value the Palm OS development community, and are very committed to our loyal base of Palm OS customers, all of whom will benefit from the agreement just concluded with Access.”

Under the license, Palm can modify the source code in any way it likes and keep all the rights to its changes, additions, and enhancements. It can also use the Garnet OS in any Palm product, regardless of whether that product is a phone, PDA, or some new device—like a personal media player.

The licensing agreement is another ironic turn of events in Palm’s history. Palm spun out PalmSource as a separate company in 2002, and changed it own name to PalmOne. PalmOne gave its operating system to PalmSource in hopes of spawning an ecosystem of devices running the Palm OS platform. But PalmSource struggled as the PDA market compressed, PalmOne Bought Handspring (the major “other” developer of Palm devices), and then PalmSource was acquired by Access, which left Palm to struggle with aging software as competitors running Windows Mobile—and the wildly popular BlackBerry—crowded into its marketspace. To make matters worse, PalmOne had to pay millions to PalmSource just to use the Palm trademark.

In July 2005, Palm abandoned the PalmOne name, reverting back to plain-old Palm. And, with the new licensing agreement, its finally set its hands back on the source code it gave away back in 2002 when it spun out PalmSource. The (very expensive) circle is complete…but can Palm now more forward?