PalmSource Embraces Linux with China MobileSoft Acquisition

Pursuant to the agreement, PalmSource would issue approximately 1,570,000 shares of PalmSource common stock in exchange for the outstanding equity and rights to acquire equity in CMS. The transaction is subject to certain conditions, including CMS shareholder approval. The transaction is anticipated to close before the end of PalmSources third fiscal quarter, ending February 28, 2005. The acquisition of CMS is expected to further extend PalmSources leadership as a software provider for phones and mobile devices worldwide. The combination of Palm OS and CMSs software products will give PalmSource one of the broadest line of mobile software in the industry, powering mobile phones at all price points in all regions of the world. CMS and its subsidiaries currently offer customers a wide range of software for mobile phones, including more than a dozen phone applications, operating software for smart and feature phones. The company has also been developing a version of Linux optimized for mobile devices. In the future, we plan to give the phone applications and phone software the Palm OS look-and-feel and data compatibility, extending the Palm OS ease-of-use to all classes of mobile phones worldwide. PalmSource will continue to offer both Palm OS® Garnet and Palm OS® Cobalt to support a broad range of mobile devices including smartphones. PalmSource also plans to implement Palm OS on top of Linux, bringing the benefits of Palm OS to the Linux community, including the award winning user interface, software frameworks based on the best of Palm OS and BeOS®, a large base of professional and consumer applications, and an enthusiastic community of more than 25 million users and over 360,000 registered developers. PalmSource intends to work as a partner within the Linux community to help Linux grow rapidly in the consumer and enterprise mobile markets. What the Linux Community is Saying When I think of the Linux desktop of the future, I think of it on my phone; on the embedded devices I spend most of my time with. The only thing that has been missing is the applications, and PalmSources move into Linux helps to erase that gap, said Matt Asay, director, Linux Business Office, Novell, Inc. The combination of Palm OS® and Linux would appear to make this optimistic view of the embedded desktop a near-term reality. Im therefore excited by PalmSources announcement and heartily welcome their contributions to the Linux community. The Open Source community welcomes PalmSource and its hardware partners as our partners. The Linux kernel and the tremendous wealth of Open Source libraries and applications are the most powerful infrastructure for the mobile platform. Because of this partnership, the capability of todays most powerful workstations and servers will, tomorrow, live in your pocket, said Bruce Perens, creator of the Open Source Definition and co-founder of the Open Source Initiative. It may not be clear to everyone just how great a potential is being unveiled today. Because Linux standards will be exposed on Palm OS devices, much of our existing desktop and server software can be moved to the mobile platform just by typing make and waiting for the sources to compile. That brings a power to the platform that lacks only a good user-interface, PalmSources forté, to bring incredible capability to the mobile user. The Open Source community has done this on niche platforms before, but the Palm OS partnership will bring that power to the mass market. Market Potential With the acquisition of CMS, PalmSource is furthering its investment in, and commitment to, China. It also enables PalmSource to sell into the entire mobile phone market worldwide. Industry analysts estimate that by 2008, the worldwide mobile device market will total more than 800 million units, 250 million of them smartphones, and 540