MILPITAS, Calif., Oct. 2 /PRNewswire-FirstCall/ --
Palm Inc. (Nasdaq: PALM) today announced that the Palm Board of Directors has approved a reverse stock split and established a ratio of 1-for 20. This move followed a vote Oct. 1 at the Palm Annual Shareholders' Meeting in which shareholders authorized the board to effect the reverse split. Palm common stock will begin trading on a reverse-split basis on Oct. 15, 2002.

As a result of the reverse stock split, every 20 shares of Palm common stock will be combined into one share of Palm common stock. The reverse stock split affects all shares of common stock, stock options and warrants of Palm outstanding as of immediately prior to the effective time of the reverse stock split. Palm will pay cash in lieu of fractional shares. The number of shares of Palm common stock currently outstanding is approximately 580 million.

Shares of Palm common stock will trade on the Nasdaq National Stock Market under the symbol PALMD for 20 trading days after the reverse split goes into effect. After that period, trading will resume under the current symbol PALM.

The decision made by Palm's Board of Directors to complete the planned reverse stock split in October 2002 is timely, said Eric Benhamou, Palm chairman and chief executive officer. It paves the way for the planned separation of our PalmSource subsidiary. It adjusts Palm's capitalization structure to appropriate levels. And it enables us to attract new investors. Meanwhile, the handheld industry is moving to a new growth phase, Palm's market share is trending up, and we are entering the most comprehensive new product cycle in Palm's history. I am convinced that this decision, combined with continued strong execution by Palm's management team, will contribute to shareholder value creation.

Palm noted that a reverse stock split would allow for an adjustment in the market price of its stock prior to an external separation of PalmSource Inc., which is responsible for the development and licensing of Palm's operating system. Palm already has established internal separation of PalmSource by creating it as a wholly owned subsidiary in December 2001 and by reporting separate financial results since February 2002. Some time in calendar 2003, Palm intends to make the separation external, which would result in shareholders of Palm receiving shares of PalmSource for each share of Palm Inc. owned on the record date. After the distribution of PalmSource shares, Palm shareholders will own shares in both companies. The reverse split will enable Palm to offset the decline in per share price that is normally associated with the separation into two companies.

EquiServe Trust Company, N.A. has been retained to manage the exchange of stock certificates.

Cautionary Note Regarding Forward-looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws, including, without limitation, statements regarding the following: the reverse stock split and the impact and effects of the reverse stock split; the handheld industry; Palm's market share; Palm's new product cycle; execution by Palm's management team; shareholder value creation; the separation of PalmSource, Inc.; and the distribution of PalmSource shares.  These statements are subject to risks and uncertainties that may cause actual results and events to differ materially, including, without limitation, the following:  possible problems arising in connection with or as a result of the separation of PalmSource, Inc. or the distribution of shares of PalmSource; the failure of the reverse stock split to adjust the market price of Palm's stock prior to the separation of PalmSource; the failure of the reverse stock split to offset any decline in the market price for Palm's stock relating to the distribution of shares of PalmSource; the failure of the reverse stock split to adjust Palm's capitalization structure and attract new investors; Palm's ability to successfully develop and introduce new products; possible defects or delays in the products and technologies developed; fluctuations in the demand for Palm's products; the ability of Palm's management team to continue to execute well and manage Palm's inventory and expenses; the failure of the reverse stock split to contribute to the creation of shareholder value; Palm's ability to compete with existing and future competitors; growth in the handheld industry and other markets and industries in which Palm operates; and Palm's ability to successfully operate as two separate companies. A detailed discussion of other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in Palm's most recent filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended May 31, 2002, as amended. Palm undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this press release.

About Palm Inc.

Information about Palm Inc. is available at http://www.palm.com/aboutpalm