Prospectus Summary
PROSPECTUS SUMMARY You should read the following summary together with the more detailed information regarding our company and the common stock being sold in this offering and our financial statements and notes to those statements appearing elsewhere in this prospectus. You should carefully consider, among other things, the matters discussed in the “Risk Factors” section beginning on page 5.PalmSource, Inc.
We are a leading developer and licensor of platform software that enables mobile information devices. Our software platform consists of operating system software, or Palm OS, and software development tools. We have also enhanced our platform with applications such as personal information management software, web browsers and e-mail. A wide range of smart mobile devices incorporate our solutions, including personal digital assistants, or PDAs; smartphones; location-aware devices; entertainment devices; and industry-specific devices used in industries such as education, hospitality and healthcare. We license Palm OS to leading smart mobile information device manufacturers, including Founder Technology, Garmin, GSPDA, Kyocera, Lenovo (formerly known as Legend), palmOne, Samsung and Sony. Products using Palm OS, or Palm Powered products, have held the number one PDA market share position in each of the past six annual reports prepared by IDC, as measured in units sold.
Our primary product offering, Palm OS, provides a flexible platform that enables the creation of powerful, innovative and easy-to-use smart mobile devices. Historically, the majority of our licensees have developed PDAs and Palm OS has attracted a large and loyal following, with approximately 30 million Palm Powered products sold to date. We have begun to license Palm OS to smartphone manufacturers and intend to continue to build on our leadership position and experience in PDAs to become a leading licensor of platform software for smartphones and other next generation smart mobile products. There are more than 275,000 third-party developers who have registered to use Palm OS developer tools to create software applications for our platform. According to PalmGear.com, a leading online provider of handheld applications with whom we have a strategic relationship, there are currently more than 20,000 applications available for Palm Powered products. To promote our software platform, we provide professional services and support for our licensees and developers.
According to an IDC report dated December 2003, annual worldwide shipments of pen-based handheld devices are projected to increase from approximately 10.2 million units in 2003 to an estimated 11.9 million units in 2007. In addition, professionals and individual consumers increasingly need to communicate while mobile, as evidenced by the rapid adoption of mobile phones and PDAs throughout the world. In an effort to reduce the number of devices that they need to carry to stay connected to critical information, users have begun to adopt a new class of smart mobile devices that provide the combined functionality of mobile phones and traditional PDAs. According to the December 2003 IDC report, annual worldwide shipments of smartphones, which IDC refers to as converged handheld devices, are projected to increase from approximately 8.6 million units in 2003 to an estimated 72.4 million units in 2007, and Palm OS is projected to power 9.0% of these devices by 2007.
Mobile information device manufacturers face the significant challenge of developing devices to appeal to a variety of customers with diverse needs, preferences and budgets. We
Index to Financial Statements
believe that to attract new customers and generate new upgrade sales, manufacturers will need to meet user demands by incorporating new innovations into mobile information devices. Palm OS is designed to enable mobile information device manufacturers to rapidly and efficiently create devices that meet diverse customer needs.
Our objective is to be a leading licensor of platform software for smartphones and other next generation smart mobile products. The key elements of our strategy to achieve this objective include:
Company Information
We were incorporated on December 3, 2001 as a wholly-owned subsidiary of Palm, Inc., or Palm, an event that we refer to in this prospectus as the separation and the date of which we refer to as the separation date. The purpose of the separation was to establish PalmSource as an independent company to conduct substantially all of Palm’s operating system software group business. In October 2003, Palm distributed to its stockholders on a pro-rata basis all of the outstanding shares of our common stock owned by Palm, an event that we refer to in this prospectus as the distribution. For further discussion of our separation from Palm and the distribution, see the section entitled “The Separation and Distribution.” At the same time as the distribution, Palm acquired Handspring, Inc., an event that we refer to in this prospectus as the Handspring merger, and the combined entity changed its name to palmOne, Inc. In this prospectus, we refer to palmOne, Inc. as “palmOne” or “Palm” interchangeably, depending upon the time and context of the event described. References in this prospectus to “PalmSource,” “we,” “our” and “us” refer to PalmSource, Inc. and not to the underwriters, Palm or palmOne. Our principal executive offices are located at 1240 Crossman Avenue, Sunnyvale, California 94089-1116 and our telephone number is (408) 400-3000. Our website can be found at www.palmsource.com. Information contained in our website is not a prospectus and does not constitute a part of this prospectus.
Trademarks
Graffiti and HotSync are registered trademarks of PalmSource. Palm, Palm OS and PalmSource are registered trademarks of, and Palm Powered is a trademark of, Palm Trademark Holding Company, LLC. Each trademark, trade name or service mark of any other company appearing in the prospectus belongs to its holder.
Index to Financial Statements
The Offering
The number of shares of our common stock outstanding after this offering is based on shares outstanding as of November 30, 2003 and assumes no exercise of the underwriters’ over-allotment option. This number does not include as of November 30, 2003:
Unless otherwise indicated, all information in this prospectus assumes that the underwriters do not exercise the over-allotment option granted to purchase additional shares in this offering. In addition, unless otherwise indicated, shares outstanding and all per share numbers have been adjusted to reflect the one-for-five reverse stock split effected on September 22, 2003.