Palm, ThinAirApps Take on Enterprise

Despite failed initiatives, company will acquire wireless software maker.

In its latest attempt to make inroads with enterprise customers, Palm Inc. on Dec. 12 announced that it will acquire ThinAirApps Inc., a New York developer of wireless enterprise software applications.

The acquisition, which is valued at $19 million and will be paid for with Palm common stock, is expected to close by the end of the month, said Palm officials in Santa Clara, Calif. Palm has been strapped for cash this year, but earlier this month, an unnamed investor gave Palm $50 million through a convertible bond.

"Acquiring ThinAirApps is a linchpin of our long-term enterprise and wireless strategies," said Todd Bradley, executive vice president and chief operating officer of Palms Solutions Group.

Those strategies have been under fire following other unsuccessful initiatives. Palm failed earlier this year to buy Extended Systems Inc., which also makes software that provides access to corporate applications from handheld devices, including those that do not support Palm OS. The Extended Systems deal, announced in March and canceled in May, was valued at $264 million. At the time, there was concern that an acquisition by Palm would mean less support for the other operating systems that Extended Systems supported.

ThinAirApps will be part of Palms Solutions Group, the hardware side of the company. The side of the company that sells the Palm operating system will be a separate subsidiary.

Industry analysts have been wary of any acquisition of a software company by a hardware company.

"We have a general position against solutions provided by hardware providers," said Ken Dulaney, an analyst at Gartner Inc., in San Jose, Calif. "Customers have a huge proliferation of devices, not all of which are provided by Palm. ... While Palm will likely support other devices, the fact that its owned by the hardware group will raise suspicions, as it did when Palm announced that they would buy Extended Systems."

In June, after Palm announced that the Extended Systems deal had fallen through, ThinAirApps executives voiced vague concern about Palms and their own place in the enterprise.

"It definitely has an effect on us to a degree," ThinAirApps CEO Jonathan Oakes said in June. "We have to take a step back and look at how we look at the market."

ThinAirApps is best known for its ThinAir Server product, which provides out-of-the-box wireless access to enterprise applications from Palm OS devices. But the company also sells products that enable developers to create their own such applications.

The companys latest product, the Identicon DB module, supports both Sun Microsystems Inc.s Java 2 Micro Edition and Research In Motion Ltd.s BlackBerry platform—the former a platform primarily for cell phones and the latter designed for e-mail pagers—both of which compete with Palm products.