SAN JOSE, Calif. — Two years and two spin-offs later, the handheld computer company that made its name with the Palm Pilot is changing its name back to Palm Inc.
PalmOne Inc. announced Tuesday that it will get full rights to the Palm brand name — and revert to its original corporate moniker — later this year.
Under terms of Tuesday's agreement, PalmOne will pay the software company it spun off in 2003, PalmSource Inc., $30 million over 3 1/2 years for the latter's 55 percent share of the Palm Trademark Holding Co.
PalmOne, which makes Treo-branded smart phones and Tungsten and Zire handhelds — also granted PalmSource certain rights to Palm trademarks over a four-year transition period. That move will likely force PalmSource to eventually change its name.
Also, PalmSource's new interim chief executive said Tuesday that he plans to move the company toward an open source system, possibly Linux.
PalmOne renewed its license of the Palm operating system in the deal announced Tuesday, saying it would pay PalmSource minimum royalty payments of $148.5 million, subject to meeting certain milestones. Under its terms, PalmOne can continue to develop and market smart phones and other mobile devices based on Palm's operating system through 2009.
Milpitas-based PalmOne was formed in 2003 when Palm Inc. spun off its software division after acquiring Handspring Inc. Sunnyvale-based PalmSource, the operating system licensing business, was spun off by palmOne later that year. The spin-offs were supposed to help spur licensing deals for PalmSource and give PalmOne more freedom to develop technology without worrying about business conflicts.
But both companies have been struggling in recent quarters as competition heats up from hardware sellers including Dell Inc. and Hewlett-Packard Co. PalmSource also faces major competition from Microsoft-powered handheld devices because of their seamless compatibility with Microsoft's suite of desktop computing software.
Both companies have also struggled with a raft of senior executive departures.