MILPITAS, Calif., Jan. 6 /PRNewswire-FirstCall/ -- Palm, Inc. (Nasdaq: PALM) today announced that it received a ruling from the Internal Revenue Service that a proposed distribution of shares of PalmSource, Inc., Palm's majority-owned operating-system software business subsidiary, will be tax-free to Palm, Inc. and its United States shareholders for U.S. federal income tax purposes.

Palm expects to distribute the shares of PalmSource, which develops and licenses the Palm operating system, to Palm, Inc. shareholders in the first half of calendar 2003, pending approval of the distribution from the Palm Board of Directors and filing of the appropriate documents with the U.S. Securities and Exchange Commission.

"The IRS ruling puts us another step closer to achieving our objective of creating two independent companies, each focused on the strategies required to strengthen its respective leadership position within the mobile-computing industry," said Eric Benhamou, Palm chairman and chief executive officer.

Separation milestones:

-- Palm, Inc. announced on July 27, 2001, that it would establish a
separate subsidiary structure for the operating system activities of
the company. The other part of the company -- Palm Solutions Group --
is responsible for Palm branded handheld computers, enterprise
software, peripherals and accessories;
-- Internal separation was accomplished in December 2001, with PalmSource
created as a wholly owned subsidiary of Palm Inc.;
-- A PalmSource board of directors was established in June 2002;
-- PalmSource ceased to be wholly owned by Palm, Inc. on Oct. 8, 2002,
when it accepted its first outside investment. Sony Corp. invested
$20 million, which resulted in an ownership of approximately 6 percent
of PalmSource; and
-- A ruling was received Dec. 30, 2002, from the IRS that a proposed
distribution of PalmSource shares to Palm shareholders in the
United States will be tax-free for U.S. federal income tax purposes.

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

NOTE: Palm OS is a registered trademark, and Palm is a trademark of Palm, Inc.

SOURCE Palm, Inc.