PalmSource gets Chinese foothold

PalmSource, which makes software for mobile devices, said Wednesday that it has agreed to acquire China MobileSoft in a deal expected to expand the company's global presence and put Linux applications squarely in its product plans.

Based in the city of Nanjing, China MobileSoft makes software for use in wireless phones and has also been developing a version of Linux for use in mobile devices. PalmSource contends that the purchase will not only give it a base of operations in China, but will also allow it to extend its product line into the Linux market.

Executives at PalmSource said the company will create a Linux-based version of its Palm operating system in hopes of tapping into the demand for such applications from the rapidly expanding mobile device market. The company cited research that estimates that by 2008, the worldwide mobile device market will be shipping more than 800 million units annually, with 250 million of those units being so-called smart phones.

"This is the next stage in our growth and a major milestone for the mobile phone industry," David Nagel, chief executive of PalmSource, said in a statement. "We believe the combination of PalmSource, CMS and Linux gives us the technological and market critical mass to compete with even the biggest proprietary operating system companies."

PalmSource representatives said CMS has approximately 160 employees, including 150 software engineers, all of whom it expects to remain with the company after the deal has closed. The company did not indicate how many of those engineers were involved in development of Linux products. PalmSource officials also cited the Nanjing region as an academic stronghold in China, where it hopes to find additional engineering talent.

Under terms of the deal, PalmSource will issue 1.57 million shares of its stock in exchange for the outstanding stock of China MobileSoft. While the acquisition remains subject to approval by China MobileSoft's shareholders, the companies said they expect the deal to close before the end of February. PalmSource shares were trading at just over $14.25 early Wednesday.

Matt Hines writes for CNET News.com.