Hand in Palm

Can prodigal corporate founders go home again? In the volatile tech industry, necessity sometimes heals old wounds. Back in 1992, engineer Jeff Hawkins and marketing-whiz partner Donna Dubinsky founded Palm Computing to bring handheld computers to the masses. Hawkins built a Palm Pilot prototype in his garage. After the electronic organizer became the shirt-pocket accessory of the 1990s, Palm was sold to U.S. Robotics, which in turn was snapped up by 3Com.

Feeling stifled by their corporate masters, Hawkins and Dubinsky left in 1998 to found a rival handheld-device maker, Handspring. After its IPO in 2000, the pair's stake was worth more than $1 billion. Palm, meanwhile, had been spun off three months earlier and was freestanding again. But the handheld market crested in 2001, when 13.3 million Palmlike devices shipped, and both firms now faced new competition from Microsoft's Pocket PC platform.

Hawkins' response: the Handspring Treo line of handhelds with a cell phone built in. The devices were critically acclaimed, but as Dubinsky says, Handspring "didn't have the marketing muscle to tell people." The firm lost $92 million in 2002; Palm, by then focused on its low-cost Zire models, lost $82 million. Suddenly, a cost-cutting marriage looked attractive.

After months of secret negotiations, the companies recently announced their nuptials, with Todd Bradley as CEO. The merger's premise is that Treos and Zires can be marketed more efficiently by one organization than two. Hawkins will return as chief technology officer, and Dubinsky will merely sit on the board. Still to be decided: the new company's name. PalmSpring, anyone?