It has emerged that Motorola is suing PalmSource for pulling out of merger talks in September. Motorola has also revealed that it is on the lookout to acquire another software company to spearhead its efforts in the mobile computing arena, revealing its anxiety to grow its mobile handset business.
Motorola has filed a lawsuit against PalmSource and is continuing to pursue mobile software firms.
A document filed by PalmSource with the SEC reveals there was a three-way auction to buy the company between Access, Motorola and an unnamed company, which saw the price offered increase from $12.25 a share to Access’ victorious final offer of $18.50. Motorola is bitter because it thought its $17.25 per share cash offer had won the day after the PalmSource board authorized managers to complete the agreement. However, this was topped by Access’s $18.50 offer, which they accepted.
Motorola is taking legal action for breach of contract, claiming the two companies had entered into a merger agreement and insisting PalmSource pay up $8.69 million in connection with a termination provision of the deal.
What the legal spat shows is the anxiety of Motorola to acquire PalmSource, despite the company’s dismal financial record and the fact that its biggest customer, Palm, has just defected to the rival Windows camp.
The big attraction of PalmSource was its claimed community of 400,000 mobile application developers and the fact that it was installing a Linux kernel in its OS. This offered ISVs an easy path into the world of Linux, which offers huge advantages when the growth area in mobile handsets is low-cost phones in developing countries. Motorola has already revealed that Linux is at the heart of its long-term handset strategy.
Indeed, despite owning its own portfolio of embedded Linux assets, Motorola appears settled on the consumer electronics Linux variant from MontaVista Software as the basis for its handsets.
Both MontaVista and embedded Linux software specialist Trolltech may attract Motorola. Trolltech offers a comprehensive application platform built for embedded Linux, and is used on numerous Linux-based PDAs and smartphones.
Motorola’s anxiety to build its mobile handset assets has already seen it acquire the entire intellectual property portfolio and engineering team of Sendo and the European team of I-mode design employees, as well as a research center from a Mitsubishi Electric subsidiary.