Palm and Extended Systems Deal At Risk

Palm Inc. is buying Extended Systems with stock and the recent drop in Palm's stock price has put the deal in a bit of jeopardy. Palm had originally offered $22 worth of Palm shares for each Extended share, subject to certain restrictions. But one of the restrictions that if Palm's stock price falls below $16.60, they will instead pay 1.325 shares for each Extended one. This week, Palm stock fell to just over $8 so the deal has dropped in value from $264 million to about $128 million.

Both companies insist that they plan to go ahead with the deal. However, it still requires the approval of Extended's shareholders, and how they will feel about making less than half of what they had originally expected isn't known.

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