Executive Business Briefing

Here is a look at Wednesday's top business stories:

Palm to buy Handspring

MILPITAS, Calif., June 4 (UPI) -- Palm Inc. said it has reached an agreement to acquire Handspring Inc. for about $168.9 million in stock, creating a stronger provider of hand- held computing and communication products.

Palm said its board also gave final approval for the much-anticipated spinoff of PalmSource Inc. Palm has been planning the separation of the software division since last summer, and has said it expects to spin off the division by the end of this summer.

Palm said shareholders of Handspring, which is based in Mountain View, Calif., will receive 0.09 of a Palm share for each share of Handspring common stock owned. Based on Palm's closing price of $12.15 Tuesday, the deal values each Handspring share at about $1.09, representing a discount of 1.8 percent from the Tuesday closing price of $1.11.

Palm said it will issue about 13.9 million shares of Palm common stock to Handspring's shareholders.

Handspring's shareholders will own about 32.2 percent of the newly merged company on a fully diluted basis, and Palm's shareholders will own about 67.8 percent.

The deal, encompassing the spinoff of PalmSource and the merger of Handspring with the remaining Palm Solutions Group of Palm, is expected to close in the fall.

The boards of both companies approved the agreement, which also has the support of Handspring's three largest employee stockholders -- Jeff Hawkins, Donna Dubinksy and Ed Colligan, who control about 37.5 percent of Handspring's outstanding shares.

Palm and Handspring share a bit of history. Hawkins co-founded Palm in 1992 with Dubinksy, Handsprings' chief executive officer. In 1998, Hawkins and Colligan and Dubinksy left Palm to create Handspring.

The combined company will be structured around two business units: handheld computing products and smartphones. It will be led by Palm Solutions Group President and Chief Executive Todd Bradley, who will remain in those positions. Hawkins, Handspring's chairman and chief product officer, will become chief technology officer.

Ken Wirt, currently Palm Solutions' senior vice president of sales and marketing will lead the handheld computing group, while Colligan, current president and chief operating officer for Handspring, will head the smartphones business. Dubinsky will serve on the board.

Palm said it expects "greater revenue opportunities" from the combination, and anticipates improved operating efficiencies to result in about $25 million in cost savings annually. The company anticipates the elimination of about 125 jobs and overlapping programs.

Palm also said it will provide an initial $10 million line of credit to Handspring for working capital until the deal closes. The line of credit may increase to $20 million, under certain conditions, the company said.

Pathmark's earnings fall 57 percent

CARTERET, N.J., June 4 (UPI) -- Pathmark Stores Inc. said its fiscal first-quarter net income plunged 57 percent, weighed down by charges related to job cuts.

The grocery-store operator reported its first-quarter net income for the period ended May 3 sank to $900,000, or 3 cents a share, from $2.1 million, or 7 cents a share during the same period a year ago.

The compnay said its latest results included a charge of $3 million for a labor buyout program in some stores and headcount reductions in its corporate office. The company also recorded a $900,000 gain from the sale of real estate.

Last year's results included a charge of $1.2 million related to job cuts and costs of $600,000 for an accounting adjustment.

Excluding the items, Pathmark said it posted a net income of $3 million, or 10 cents a share, compared with $3.9 million, or 13 cents a share, a year earlier.

Sales in the latest quarter rose 2.9 percent to $1 billion from $976.8 million a year earlier. Sales at stores open more than a year increased 1.9 percent.

The company said first-quarter results were in line with its expectations, and it reaffirmed earnings and sales projections for the full year.

When it reported fourth-quarter results on April 2, Pathmark said it expected full-year 2003 same-store sales to be flat to up 1 percent, with earnings per share of 52 cents to 62 cents.