Palm deals a new hand.

The article analyzes the implications of the merger of rival PDA makers Palm and Handspring, and looks at two share offerings to investors. In the summer of 2001, FORTUNE recommended that rival PDA makers set aside their differences and get hitched to split R&D costs and to avoid a price war. More than two years later, after a brief engagement, they finally took our advice. On Oct. 28 not only did the two companies complete their corporate marriage, but they also produced offspring. That gives adventurous investors two new ways to play Palm. The union of the money-losing handheld-device makers, called PalmOne, will continue to focus on hardware. And the Palm division that licenses its operating system has been spun off as a separate software company named PalmSource. So which stock should investors bet on? Either one presents a high risk. The early response to PalmSource shares reflects the company's potential for licensing software to PalmOne's rivals in this growing market. Overseas the competition might be even stiffer. PalmOne, meanwhile, is off to a decent start in the smart-phone market.