Palm sees trouble ahead for Palm OS

Palm's plans for future products could be affected by delays in development of a new version of the Palm OS software, the company warned in a regulatory filing.

The company has an agreement with its former subsidiary, PalmSource, to codevelop the operating system software for use in its PDAs (personal digital assistants) and smart phones. However, PalmSource, now owned by Access Co. of Japan, did not meet some of the deadlines set out by the agreement, Palm said in a filing Friday with the U.S. Securities and Exchange Commission.

Palm must pay Access a minimum license and royalty fee of $42.5 million a year this year, but the minimum payment obligation in future years has been waived because Access missed the development milestones, it said. Palm said it owed Access royalties and license fees totaling $35.4 million in its fiscal year to May 31, and $32 million in the preceding fiscal year.

A spokeswoman for Access in Europe would not comment on the development delays, but said work on the software is continuing at sites in the U.S., Europe, and China.

Access unveiled its plans for the next generation of the software, which it calls the Access on Linux Platform, at the 3GSM World Congress in February. The software, based on the open-source Linux operating system, will be able to run applications designed for Palm OS, it said then.

Palm is seeking more control over the development and distribution of the current version of the Palm OS software. It has licensed the software through Dec. 2, 2009, and uses it in all its PDAs and most of its smart phones, it said. Some of its smart phones run Microsoft's Windows Mobile software.

If it is unable to negotiate this with PalmSource, then the development and distribution of products running future versions of the software may suffer, the company said. However, Palm will continue to release new products running the current version of Palm OS, it said.

Delays in the development of Palm OS will not, in any case, affect the launch of Palm's next smart phone, due by the end of this year, because that model, being developed for U.K. mobile phone operator Vodafone Group, will run Windows Mobile, said a spokeswoman for Palm in the U.K.