[PalmOne makes major move into global phone software territory with acquisition of China MobileSoft Limited (CMS) creating opportunity for a Linux-based version of Palm OS.]

Sunnyvale, Calif. -- PalmSource, Inc., provider of Palm OS(R), announced entry into an agreement for the acquisition of China MobileSoft Limited (CMS), a leading Chinese mobile phone software company with business operations headquartered with its wholly-owned subsidiary, MobileSoft Technology (Nanjing), in China. Pursuant to the agreement, PalmSource would issue approximately 1,570,000 shares of PalmSource common stock in exchange for the outstanding equity and rights to acquire equity in CMS. The transaction is subject to certain conditions, including CMS shareholder approval. The transaction is anticipated to close before the end of PalmSource's third fiscal quarter, ending February 28, 2005.

The acquisition of CMS is expected to further extend PalmSource's leadership as a software provider for phones and mobile devices worldwide. The combination of Palm OS and CMS's software products will give PalmSource one of the broadest line of mobile software in the industry, powering mobile phones at all price points in all regions of the world.

David Nagel, president and CEO of PalmSource, Inc. said "We believe the combination of PalmSource, CMS and Linux gives us the technological and market critical mass to compete with even the biggest proprietary operating system companies."

CMS and its subsidiaries currently offer customers a wide range of software for mobile phones, including more than a dozen phone applications, operating software for smart and feature phones. The company has also been developing a version of Linux optimized for mobile devices. In the future, we plan to give the phone applications and phone software the Palm OS look-and-feel and data compatibility, extending the Palm OS ease-of-use to all classes of mobile phones worldwide.

PalmSource will continue to offer both Palm OS(R) Garnet and Palm OS(R) Cobalt to support a broad range of mobile devices including smartphones. PalmSource also plans to implement Palm OS on top of Linux, bringing the benefits of Palm OS to the Linux community, including the award winning user interface, software frameworks based on the best of Palm OS and BeOS(R), a large base of professional and consumer applications, and an enthusiastic community of more than 25 million users and over 360,000 registered developers. PalmSource intends to work as a partner within the Linux community to help Linux grow rapidly in the consumer and enterprise mobile markets.

With the acquisition of CMS, PalmSource is furthering its investment in, and commitment to, China. It also enables PalmSource to sell into the entire mobile phone market worldwide. Industry analysts estimate that by 2008, the worldwide mobile device market will total more than 800 million units, 250 million of them smartphones, and 540 million of them feature and voice phones. The combined company will be poised to take advantage of this larger opportunity.

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