This strategy takes Palm beyond its traditional strength serving individual users, to encompass enterprise solutions. Extended Systems' product offerings represent the "glue" that binds the wealth of enterprise applications with easy-to-use handheld computers, which can now be managed by corporate information officers (CIOs).

Under the terms of the definitive agreement, Extended Systems' stockholders will receive shares of Palm valued at $22 per Extended Systems' share, subject to a collar described below. The transaction values Extended Systems at approximately $264 million on a fully diluted basis.

Importantly, this acquisition will make Palm a unique vendor that can provide both handheld computers and enterprise-class mobile infrastructure software and support for multiple operating systems, including Palm OS, Pocket PC, Windows CE, EPOC, and RIM. This comprehensive, behind-the-firewall solution supports groupware and business applications -- enhancing overall organizational productivity and controlling costs.

In a related move to sharpen customer focus, Palm created three strategic business groups -- the Enterprise Solutions Group, the Individual Solutions Group, and the Platform Solutions Group.

"Palm intends to be as popular with CIOs as it is with individuals," said Carl Yankowski, Palm's chief executive officer. "Palm will be unmatched in its ability to deliver information to individual users and large organizations using a Palm solution or any mobile operating system or handheld device."

"Extended Systems and Palm share a vision and have complementary products and culture. Together we significantly strengthen our ability to serve the needs of the explosive enterprise market," said Extended Systems CEO, Steve Simpson. "This move is a natural evolution as we join to create one end-to-end solution from a single vendor. It's a win-win for customers, employees and stockholders."

Extended Systems' prominence in the mobile enterprise market strengthens Palm's position, and brings Palm the opportunity to enhance its handheld device business, and, for the first time, sell mobile infrastructure software, services and support. Noted analysts project that the server sync segment of the enterprise market alone could exceed $1 billion by 2003.(1) These new revenue sources also provide high margin business opportunities for Palm.

In addition to Extended Systems' mobile data management and Bluetooth wireless connectivity products, the acquisition will provide Palm with a strong engineering staff experienced in the enterprise market, as well as a worldwide sales force, strategic partners, and a large installed base of enterprise customers -- including British Airways, International Paper Company, Cadbury Schweppes, Daimler Chrysler, and Orange.

Under the terms of the agreement, Extended Systems' stockholders will receive a number of Palm shares based on the average closing price for Palm for the 10 trading days ending two business days prior to the Extended Systems' stockholders' meeting. If the average closing price of Palm stock is between $16.60 and $22.00 per share, Extended Systems' stockholders will receive a number of shares equal to $22.00 per share divided by the Palm average closing price. If the average price is at or above $22.00, Extended Systems' stockholders will receive one Palm share for each Extended Systems' share; if the average price is at or below $16.60, Extended Systems' stockholders will receive 1.325 Palm shares for each Extended Systems' share. Palm will account for this transaction using the purchase method of accounting. The transaction is subject to regulatory and Extended Systems stockholder approvals, and is expected to close in June 2001.