Filed Pursuant to Rule 424(b)(5)

We are offering 20,000,000 shares of our common stock. Our affiliates, Elevation Partners, L.P. and Elevation Employee Side Fund, LLC (together, “Elevation”) and Roger B. McNamee, one of Elevation’s representatives on our board of directors, have informed us of their intention to purchase an aggregate of $37 million of the shares being offered in this offering for investment purposes. Such purchases will be made at the public offering price.

Our common stock is listed on the NASDAQ Global Select Market under the symbol “PALM.” The last reported sale price of our common stock on September 22, 2009 was $17.07 per share.

Investing in our common stock involves risks. See “Risk Factors” beginning on page S-8.

We have granted the underwriters an option for 30 days to purchase up to an additional 3,000,000 shares of common stock to cover over-allotments, if any, at the public offering price, less underwriting discounts and commissions.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities, or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares of common stock to purchasers on September 28, 2009.

This document is in two parts. The first part is the prospectus supplement, which describes the specific terms of this offering and also adds to and updates information contained in the accompanying prospectus and the documents incorporated by reference into this prospectus supplement and the accompanying prospectus. The second part, the accompanying prospectus, gives more general information about securities we may offer from time to time, some of which does not apply to this offering. To the extent the information contained in this prospectus supplement differs or varies from the information contained in the accompanying prospectus, the information in this prospectus supplement controls. Before you invest in shares of our common stock, you should carefully read this prospectus supplement, along with the accompanying prospectus, in addition to the information contained in the documents we refer to under the heading “Where You Can Find More Information” in this prospectus supplement.

You should rely only on the information contained or incorporated by reference in this prospectus supplement, the accompanying prospectus or in any related free writing prospectus. Neither we nor any of the underwriters, has authorized any other person to provide you with different or additional information. If anyone provides you with different or additional information, you should not rely on it. Neither we nor any of the underwriters is making an offer or sale of securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information in this prospectus supplement, the accompanying prospectus or any free writing prospectus we may authorize to be delivered to you, including any information incorporated by reference, is accurate as of any date other than their respective dates. If any statement in one of these documents is inconsistent with a statement in another document having a later date—for example, a document incorporated by reference in this prospectus supplement or the accompanying prospectus—the statement in the document having the later date modifies or supersedes the earlier statement.

We have not taken any action to permit an offering of our common stock outside the United States or to permit the possession or distribution of this prospectus outside the United States. Persons outside the United States who come into possession of this prospectus supplement and/or the accompanying prospectus must inform themselves about and observe any restrictions relating to the offering of our common stock and the distribution of this prospectus supplement and the accompanying prospectus outside of the United States.

You must comply with all applicable laws and regulations in force in any applicable jurisdiction and you must obtain any consent, approval or permission required by you for the purchase, offer or sale of our common stock under the laws and regulations in force in the jurisdiction to which you are subject or in which you make your purchase, offer or sale, and neither we nor the underwriters will have any responsibility therefor.

We reserve the right to withdraw this offering of our common stock at any time. We and the underwriters also reserve the right to reject any offer to purchase, in whole or in part, for any reason, or to sell less than the amount of our common stock offered hereby.

Certain persons participating in this offering may engage in transactions that stabilize, maintain or otherwise affect the price of our common stock. Such transactions may include stabilization and the purchase of our common stock to cover short positions. For a description of these activities, see “Underwriting.”

The terms “Palm,” “we,” “us,” “the company” and “our” refer to Palm, Inc. and its consolidated subsidiaries except where expressly indicated or the context otherwise requires.

The term “Elevation” refers to Elevation Partners, L.P. together with its affiliate, Elevation Employee Side Fund, LLC.

Certain matters discussed in this prospectus supplement and the accompanying prospectus or incorporated by reference into this prospectus supplement and the accompanying prospectus are “forward-looking statements.” The Private Securities Litigation Reform Act of 1995 has established that these statements qualify for safe harbors from liability. Forward-looking statements generally are identified by the words “believes,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would” and similar expressions and include, without limitation, statements regarding our intentions, expectations and beliefs regarding: the launch of Palm Pixi with Sprint and Palm Pre with Telefónica; our ability to build a more diversified carrier base and product portfolio; mobile products and the mobile product market; our leadership position in mobile products; our market share; competition and our competitive advantages; our ability to grow our business; our future revenue, gross margins, operating income, operating results, profitability and future cash flows; pricing and average selling prices for our products; our corporate strategy; growth in the smartphone market; consumer demand for, and the drivers of consumer demand for, mobile devices; capitalizing on industry trends and dynamics; economic trends and market conditions; international, political and economic risk; the development and introduction of new products and services; our product offerings and delivery of sophisticated product functionality; our ability to develop and be identified with innovative, easy-to-use mobile products; our ability to respond to customer needs; our customer-focused design approach; customer loyalty and connections to the Palm brand; our ability to create customers’ preference for our products; acceptance of our smartphone products; market demand for our products; the resources that we and our competitors devote to development, promotion and sale of products; our expectations regarding our product lines; the ability of Palm webOS to support a multi-year roadmap of mobile devices and services; the ability of Palm webOS to be a key differentiator and competitive advantage; the importance of owning and integrating the operating platform and device hardware; our product mix; our ability to broaden and expand our wireless carrier relationships; revenue and credit concentration with our largest customers, including Sprint; concentration of bad debt risks and allowances for doubtful accounts; our ability to cause application providers to provide applications for our products; the ability of developers to easily develop products and services to complement Palm webOS; our infrastructure for delivery of Palm webOS software applications and support to end users; the filing of patent applications and issuance of patents; the proliferation of companies acquiring or developing patents to assert offensively; laws, standards and other regulatory requirements and their application to our business; royalty obligations; inventory, channel inventory levels and inventory valuation; repair costs; rights of return; rebates and price protection; product warranty accrual and liability; our forecasted product and manufacturing requirements; the ability of our suppliers to meet our quantity, quality and cost requirements; the adequacy of our properties, facilities and operating leases and our ability to secure additional space; our tax strategy; realization and recoverability of our net deferred tax assets; the need to increase our deferred tax asset valuation allowance; utilization of our net operating loss and tax credit carryforwards; our belief that our cash, cash equivalents and short-term investments will be sufficient to satisfy our anticipated cash requirements and debt service or repayment obligations; the necessity or advisability of seeking additional funding; the effects of expansion; acquisition opportunities and our evaluation of such opportunities; our stock repurchase plans; impairment charges in connection with our investments in auction rate securities; the liquidity of, holding periods for and our ability and intent to hold our auction rate securities; the completion of restructuring actions; compensation and other expense reductions; dividends; interest rates; the timing and amount of our cash generation and cash flows; our use of options, restricted stock and restricted stock units; unrecognized compensation cost under our stock plans; stock price volatility; option exercise behavior under our stock plans; vesting, terms and forfeiture of our equity awards; our stock-based compensation valuation models; our defenses to, and the effects and outcomes of, legal proceedings and litigation matters; provisions in our charter documents, Delaware law and a Stockholders’ Agreement and the potential effects of a stockholder rights plan; our relationship with Elevation Partners, L.P.; our debt obligations, the related interest

expense for future periods and the effect of any non-compliance; accounting for Palm webOS products and for legacy products; and the potential impact of our critical accounting policies and changes in financial accounting standards or practices.

These forward-looking statements are subject to risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements. All forward-looking statements are qualified by the risks described in “Risk Factors” in this prospectus supplement and in the documents incorporated by reference into this prospectus supplement and the accompanying prospectus. We have no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or risks. New information, future events or risks may cause the forward-looking events we discuss in this prospectus not to occur.

PROSPECTUS SUPPLEMENT SUMMARY

This summary highlights some basic information contained or incorporated by reference in this prospectus supplement or the accompanying prospectus. This summary is not complete and does not contain all of the information that you should consider before investing in our common stock. You should carefully read the entire prospectus supplement and the accompanying prospectus, including the section entitled “Risk Factors” as well as the documents incorporated by reference.

The Company

Palm, Inc. is a provider of mobile products that enhance the lifestyle of individual users and business customers worldwide. We create thoughtfully integrated technologies that better enable people to stay connected with their family, friends and colleagues, access and share the information that matters to them most and manage their daily lives on the go. Our products for consumers, mobile professionals and businesses currently include Palm Pre™, Palm Pixi™, Treo™ and Centro™ smartphones, as well as software, services and accessories.

Our Palm Pre smartphone is based on the Palm webOS™ mobile platform which combines standard technology and creative and innovative advancements, and leverages industry-standard web development technologies such as CSS, HTML5 and JavaScript, to facilitate a rich, open development platform. On June 6, 2009, the Palm Pre was made available from Sprint in the United States and on August 27, 2009 it was made available from Bell Mobility in Canada. On July 7, 2009, we announced that the Palm Pre is scheduled to be available initially in the United Kingdom, Ireland, Germany and in Spain exclusively on local Telefónica networks, in time for the 2009 holiday season.

On September 9, 2009 we announced the Palm Pixi, which is first scheduled to be available from Sprint in time for the 2009 holiday season. The Palm Pixi is our second smartphone based on Palm webOS.

Our products are sold through select Internet, retail, reseller and wireless carrier channels in many countries, and at Palm online stores. We began operations in 1992 and are incorporated in Delaware.

Other Information

Our principal executive offices are located at 950 West Maude Avenue, Sunnyvale, CA 94085, and our telephone number is (408) 617-7000. We maintain a website at www.palm.com where general information about us is available. We are not incorporating the contents of this website into this prospectus supplement.

For a description of our business, financial condition, results of operations and other important information, see our filings with the Securities and Exchange Commission (“SEC”) incorporated by reference in this prospectus supplement. For instructions on how to find copies of these and our other filings incorporated by reference in this prospectus supplement, see “Where You Can Find More Information.”

The Offering

Common stock offered

20,000,000 shares of common stock, $0.001 par value per share.

Common stock to be outstanding immediately after this offering

162,329,477 shares

Use of proceeds

We intend to use the net proceeds we receive from this offering for working capital and general corporate purposes. See “Use of Proceeds.”

Affiliate participation

Elevation and Mr. McNamee have informed us of their intention to purchase an aggregate of $37 million of the shares being offered in this offering. Such purchases will be made at the public offering price.

Risk factors

See “Risk Factors” and the other information included or incorporated by reference in this prospectus supplement and the accompanying prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock.

Nasdaq Global Select Market trading symbol

“PALM”

Unless the context requires otherwise, the number of shares of our common stock to be outstanding after this offering is based on the number of shares outstanding as of August 28, 2009. The number of shares of our common stock to be outstanding after this offering does not take into account:

38,235,294 shares of common stock issuable upon conversion of outstanding Series B Convertible Preferred Stock (“Series B Preferred Stock”) at a conversion price of $8.50 per share;

15,692,307 shares of common stock issuable upon conversion of Series C Convertible Preferred Stock (“Series C Preferred Stock”) at a conversion price of $3.25 per share;

3,570,000 shares of common stock issuable upon exercise of outstanding warrants to purchase common stock at an exercise price of $3.25 per share;

23,126,446 shares of common stock issuable upon the exercise of outstanding stock options as of August 28, 2009 at a weighted average exercise price of $7.91 per share;

1,169,779 shares of common stock issuable upon the vesting of restricted stock units as of August 28, 2009; and

an aggregate of 20,192,652 shares of common stock reserved for future issuances under our 1999 Employee Stock Purchase Plan, 1999 Stock Plan and 2001 Stock Option Plan for Non-Employee Directors.

Unless otherwise indicated, all information in this prospectus supplement assumes no exercise of the underwriters’ over-allotment option to purchase up to an additional 3,000,000 shares of common stock.

Summary Consolidated Financial Data

The following summary consolidated financial data as of and for the years ended May 29, 2009, May 30, 2008 and June 1, 2007 has been derived from our audited financial statements incorporated by reference into this prospectus supplement and the accompanying prospectus. The selected consolidated financial information for the three months ended August 28, 2009 and August 29, 2008 have been derived from our unaudited financial statements incorporated by reference into this prospectus supplement and the accompanying prospectus. The information set forth below is not necessarily indicative of our future financial condition or results of operations and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited consolidated financial statements and notes to those statements included in our annual report on Form 10-K for the year ended May 29, 2009 and our unaudited financial statements and related notes appearing in our Form 10-Q for the three months ended August 28, 2009.

Palm’s 52-53 week fiscal year ends on the Friday nearest May 31, with each fiscal quarter ending on the Friday generally nearest August 31, November 30 and February 28. For presentation purposes, the periods are shown in the table below as ending on August 31, November 30, February 28 and May 31, as applicable.


	As of and for the Years Ended May 31,								As of and for the Three Months Ended August 31,
	2009(1)			2008(2)			2007		2009(3)			2008
	(in thousands, except for share data)
Consolidated Statements of Operations Data:
Revenues	$	735,872		$	1,318,691		$	1,560,507	$	68,004		$	366,857
Cost of revenues		576,113			916,810			985,369		70,788			269,516
Operating income (loss)		(264,809	)		(126,045	)		70,058		(127,452	)		(21,813	)

Income tax provision (benefit)		404,265			(52,809	)		36,044		65			(2,634	)

Net income (loss)		(732,188	)		(105,419	)		56,383		(161,095	)		(39,477	)
Accretion of series B and series C redeemable convertible preferred stock		21,285			5,516			—		3,372			2,401
Net income (loss) applicable to common stockholders	$	(753,473	)	$	(110,935	)	$	56,383	$	(164,467	)	$	(41,878	)

Net income (loss) per common share:
Basic	$	(6.51	)	$	(1.05	)	$	0.55	$	(1.17	)	$	(0.39	)

Diluted	$	(6.51	)	$	(1.05	)	$	0.54	$	(1.17	)	$	(0.39	)

Shares used to compute net income (loss) per common share:
Basic		115,725			105,891			102,757		141,003			108,291
Diluted		115,725			105,891			104,442		141,003			108,291

Consolidated Balance Sheet Data:
Cash, cash equivalents and short-term investments	$	255,133		$	258,748		$	546,685	$	211,782		$	248,311
Working capital (deficiency)		11,137			128,740			456,624		(269,459	)		113,864
Total assets		643,236			1,180,262			1,548,002		793,951			1,152,633
Series C derivatives		—			—			—		235,004			—
Current and long-term debt		394,000			398,000			—		393,000			397,000
Series B redeemable convertible preferred stock		265,412			255,671			—		267,905			258,072
Series C redeemable convertible preferred stock		40,387			—			—		16,876			—

Total stockholders’ equity (deficit)		(413,865	)		111,020			1,062,411		(738,948	)		86,362

(1)

In January 2009, we sold 100,000 units, or the Series C Units, to the private-equity firm Elevation Partners, L.P., or Elevation, in exchange for $100.0 million. Each Series C Unit consists of one share of Palm’s Series C Preferred Stock and a warrant exercisable for the purchase of 70 shares of Palm’s common stock, or the Detachable Warrants. The net benefit received for the Series C Units consists of the $98.3 million net cash proceeds, after issuance costs, and $53.4 million related to our right to elect Elevation to sell 49% of its initial investment to other investors on the same or better terms than Elevation acquired the Series C Units, with Palm receiving any net gains realized upon such a sale, or the Transfer Right, which we determined represented a derivative, or the Series C Derivative. Of the $153.4 million net benefit received, $77.8 million and $22.0 million was allocated to Series C Preferred Stock and the Detachable Warrants, respectively, with $51.9 million allocated to additional paid-in capital as a result of the beneficial conversion feature and $1.7 million recorded in issuance costs. In March 2009, we elected to cause Elevation to convert 49,000 Series C Units, or 49% of Elevation’s initial investment, into shares of common stock. These shares were subsequently sold in a public offering along with newly issued shares, of which Elevation repurchased a portion. As a result of this offering, we received additional cash proceeds of $103.5 million, net of the $49.0 million investment returned to Elevation and $7.1 million in underwriting discounts, commissions and estimated offering expenses to be paid by us. On an as-converted and an as-exercised basis, Elevation’s shares represented 33% of our voting shares outstanding as of May 31, 2009. We have recorded $21.3 million related to the accretion of Series B Preferred Stock and Series C Preferred Stock for fiscal year 2009 and a loss of $2.5 million on the Series C Derivative. Our fiscal year 2009 results also include charges of $35.9 million as a result of the impairment of our investments in auction rate securities, or ARS, and a non-cash charge of $407.4 million to the provision for income taxes related to the establishment of the valuation allowance against our deferred tax assets in the United States during the second quarter of fiscal year 2009, net of tax benefits generated during the second quarter of fiscal year 2009.

(2)

In October 2007, we sold 325,000 shares of Series B Preferred Stock to Elevation in exchange for $325.0 million, of which $250.2 million was allocated to Series B Preferred Stock and reflects a discount of $9.8 million related to issuance costs, with the remaining $65.0 million allocated to additional paid-in capital as a result of a beneficial conversion feature. We utilized these proceeds, along with existing cash and the proceeds of $400.0 million of new debt, to finance a $9.00 per share one-time cash distribution of $949.7 million to stockholders of record as of October 24, 2007, or the Recapitalization Transaction. In connection with the Recapitalization Transaction, we also recorded $5.5 million related to the accretion of Series B Preferred Stock for fiscal year 2008 and $8.0 million related to a stock-based compensation charge for the modification of certain option awards to include anti-dilution provisions. Our fiscal year 2008 results also include charges of $32.2 million as a result of the impairment of our investments in ARS which are partially offset by a gain on sale of land of $4.4 million.

(3)

As of August 31, 2009, Palm had derivative liabilities resulting from the sale of the Series C Units to Elevation in January 2009, which were in the form of detachable warrants and a conversion feature of the Series C Preferred Stock. These derivative liabilities were recorded on June 1, 2009 in connection with the adoption of a new accounting standard. Beginning with the first quarter of fiscal year 2010, the Series C derivatives will be adjusted to estimated fair value at the end of each reporting period. Palm did not have any asset or liability derivatives as of May 31, 2009.

Any investment in our common stock involves a high degree of risk. You should consider the risks described below carefully and all of the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus before deciding whether to purchase our common stock. The risks and uncertainties described below are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. If any of the events described in the following risks actually occur, our business, results of operations, operating cash flows and financial condition could suffer. In that event, the price of our common stock could decline, and you may lose all or part of your investment in our common stock. The risks discussed below also include forward-looking statements and our actual results may differ substantially from those discussed in these forward-looking statements. See “Caution Concerning Forward-Looking Statements” in this prospectus supplement and the accompanying prospectus.

Our revenues, gross margins, results of operations and operating cash flows have been declining in recent quarters and are generally subject to fluctuations, and if we fail to meet the expectations of our investors, our stock price may decrease significantly.

We have had negative operating cash flows and net losses in recent quarters. Our revenues, gross margins, results of operations and operating cash flows are difficult to forecast and will be particularly sensitive to product launches, at least until we have a more diversified carrier base for and portfolio of Palm webOS products. Due to our anticipated timing and size of our launch of the Palm Pre with Telefónica and Palm Pixi with Sprint, as well as continued decline in demand for our legacy products, we expect that our operating cash flows and our revenues for the second quarter of fiscal year 2010 will be lower than those achieved in the first quarter of fiscal year 2010. Our future revenues, gross margins, results of operations and operating cash flows may continue to decline or fluctuate significantly and may not meet our expectations or those of our investors. If this occurs, the price of our stock will likely decline. Many factors may cause these declines or fluctuations including, but not limited to, the following:

Any of the foregoing factors could have an adverse effect on our business, results of operations, operating cash flows and financial condition.

If we fail to develop and introduce new products and services successfully and in a cost-effective and timely manner, we will not be able to compete effectively and our ability to generate revenues and operating cash flows will suffer.

We operate in a highly competitive, rapidly evolving environment, and our success depends on our ability to develop and introduce new products and services that our customers and end users choose to buy. If we are unsuccessful at developing and introducing new products and services, including Palm Pixi, that are appealing to our customers and end users with acceptable quality, prices and terms, or if the effort of migrating from existing products and services to new products and services is considered to be excessive by end users, we will not be able to compete effectively and our ability to generate revenues will suffer. The development of new products and services is very difficult and requires high levels of innovation. The development process is also lengthy and costly. If we fail to accurately anticipate technological trends or our end users’ needs or preferences, are unable to complete the development of products and services in a cost-effective and timely fashion or are unable to appropriately ramp production to fulfill customer demand, we will be unable to successfully introduce new products and services into the market or compete with other providers. Even if we complete the development of our new products and services in a cost-effective and timely manner, they may not gain traction in the market at all or at anticipated levels.

As we introduce new or enhanced products, such as Palm Pixi, or integrate new technology into new or existing products, we face risks including, among other things, disruption in customers’ ordering patterns, excessive levels of existing product inventories, revenue deterioration in our existing product lines, insufficient supplies of new products to meet customers’ demand, possible product and technology defects and a potentially different sales and support environment. Premature announcements or leaks of new products, features or technologies may exacerbate some of these risks by reducing the effectiveness of our product launches, reducing sales volumes of current products due to anticipated future products, making it more difficult to compete, shortening the period of differentiation based on our product innovation, straining relationships with our partners and/or increasing market expectations for the results of our new products before we have had an opportunity to demonstrate the market viability of the products. Our failure to manage the transition to new products or the integration of new technology into new or existing products could adversely affect our business, results of operations, operating cash flows and financial condition.

We are substantially dependent on our Palm webOS mobile platform; Palm webOS faces significant competition and may not be preferred by our wireless carrier partners or end users.

In the first quarter of fiscal year 2010, we launched Palm Pre, our first smartphone based on our new Palm webOS mobile platform. We expect Palm webOS to be the cornerstone of our product roadmap and the services that we provide. We also expect Palm webOS to be a key differentiator for us. However, as Palm webOS is a new operating system, or OS, we do not yet have the experience with Palm webOS to determine its commercial viability or sustainability. We also have not had the advantage of working with and refining the OS over a long period of time, especially under commercial conditions. Because we recently launched products based on Palm webOS, and at a time when revenues from most of our legacy products are declining, our business will be dependent on Palm Pre and Palm Pixi until we can diversify our product portfolio. The importance of Palm webOS, Palm Pre and Palm Pixi to our business substantially magnifies the risks expressed throughout this “Risk Factors” section with respect to our products and our business.

While we are substantially dependent on Palm webOS products, we continue to offer smartphones based on the Palm OS and Windows Mobile OS. However, these operating systems do not provide us with the same benefits as a proprietary OS, such as Palm webOS, in terms of control and opportunity to differentiate. Moreover, our licenses to the Palm OS and Windows Mobile OS are subject to the terms of the agreements we have with ACCESS Systems Americas and Microsoft, respectively. We would not have access to these operating systems if we were to breach the license agreements and cause our licensors to terminate our licenses. Furthermore, although ACCESS Systems and Microsoft offer some level of indemnification for damages arising from lawsuits involving their respective operating systems and from damages relating to intellectual property infringement caused by such operating systems, we could still be adversely affected by a determination adverse to our licensors, product changes that may be advisable or required due to such lawsuits or the failure of our licensors to indemnify us adequately.

There is significant competition from makers of smartphones that differentiate their products in part through alternative OS software. A number of competitors offer alternative Windows Mobile OS products. Google is heading a group that has introduced the Android OS for which certain of our competitors are developing products. The LiMo Foundation is another consortium that is developing a Linux-based mobile OS. Other competitors have or are developing proprietary operating systems, including Apple’s OS X, Nokia’s Symbian OS, RIM’s Blackberry OS and various Linux-based operating systems. Still other competitors, such as Samsung and LG, are developing products that have a combination of keyboards, touchscreens and advanced media functionality that compete with smartphones like ours and that use proprietary and other alternative operating systems. These and other competitors could devote greater resources to the development and promotion of alternative operating systems and to the support of the third-party developer community, which could attract the attention of influential user segments and our existing and potential customers and end users. Moreover, some of the largest wireless carriers have joined the consortiums developing or indicated their support for rival operating systems, including the LiMo Foundation and Android, respectively. Wireless carriers may demonstrate a preference for rival operating systems, thereby giving preference to our competitor’s products and making acceptance of our products more difficult among our key wireless carrier partners. In addition, this could require us to raise the performance and differentiation standards for the operating systems that we offer in order to remain competitive.

We cannot assure you that Palm webOS or the operating systems we license will continue to draw the customer interest necessary to provide us with a level of competitive differentiation. If Palm webOS or the operating systems that we license in our current or future products do not continue to be competitive, our revenues, results of operations and operating cash flows could be adversely affected.

If our Palm webOS service offerings do not scale as anticipated, or we are unable to grow data center capacity as needed, our business will be harmed.

Our Palm webOS service offerings represent a new service to consumers that we have not provided before. We cannot assure you that we will be able to implement these new services and products successfully, in a timely manner, or at all. If we are unable to deliver this new service or product effectively, or in a way that satisfies our customers and end users, our business and operating cash flows may suffer. Even if we are able to deliver this new service or product effectively, its delivery may require more resources, both financial and otherwise, than originally anticipated, which could restrict our ability to develop new products and services and/or grow or maintain our business.

The ability of our Palm webOS service offerings to scale to support a substantial increase in the number of users in an actual commercial environment is unproven. If our Palm webOS service offerings do not efficiently and effectively scale to support and manage a substantial increase in the number of users while maintaining a high level of performance, our business will be harmed. In addition if we are unable to secure data center space with appropriate power, cooling and bandwidth capacity, we may not be able to efficiently and effectively scale our business to manage the addition of any new wireless carrier customers, increases in subscriber growth or increases in data traffic.

Our products may contain errors or defects, which could result in the rejection or return of our products, damage to our reputation, lost revenues, diverted development resources and increased service costs, penalties, duties to repair, warranty claims and litigation.

Our products are complex and must meet stringent user requirements. In addition, we warrant that our products will be free of defect for 90 to 365 days after the date of purchase, depending on the product. In Europe, we are required in some countries to provide a two-year warranty for certain defects. In addition, certain of our master purchase agreements with wireless carriers include epidemic failure clauses with low thresholds that we have in some instances exceeded. If invoked, these clauses may entitle the wireless carrier to return or obtain credits for products in inventory or to cancel outstanding purchase orders.

In addition, we must develop our hardware and software application products quickly to keep pace with the rapidly changing mobile devices market, and we have a history of frequently introducing new products. Products and software as sophisticated as ours are likely to contain undetected errors or defects, especially when first introduced or when new models or versions are released. Our products and software may not be free from errors or defects after commercial shipments have begun, which could result in the rejection of our products, damage claims, penalties, duties to repair, litigation and recalls and jeopardize our relationship with wireless carriers. End users may also reject or find issues with our products and have a right to return them even if the products are free from errors or defects. In either case, returns or quality issues could result in damage to our reputation, lost revenues, diverted development resources, increased customer service and support costs, additional contractual obligations to wireless carriers, warranty claims and litigation, any of which could harm our business, results of operations, operating cash flows and financial condition.

We recently launched Palm webOS, and it has not been subject to commercial use for a substantial period of time. Given the nature of software, particularly OS software, we cannot be certain that it will be free of software defects or bugs. Early detection of such defects or bugs by us could delay the launches of future Palm smartphone products. Detection of defects or bugs after such products have been launched could result in the rejection of our products, damage claims, litigation and recalls. Any defects or bugs could jeopardize our relationship with wireless carriers and adversely affect our business, results of operations, operating cash flows and financial condition.

Current recessionary economic and financial market conditions, as well as our continued investment in our corporate transformation, have had and will continue to have a negative effect on our liquidity. We may need or find it advisable to seek additional funding, which may not be available or which may result in substantial dilution to the value of our common stock. If we seek additional funding, adequate funds may not be available on favorable terms, or at all. Inadequate liquidity could adversely affect our business operations in the future.

We require substantial liquidity to continue spending to support product development, production and launches, to implement cost savings and restructuring plans, to meet scheduled debt and lease payment requirements and to run and expand our regular business operations. Although we currently believe that we have sufficient cash, cash equivalents and short-term investments to meet our anticipated operating cash requirements and debt service or repayment obligations for at least the next 12 months, we have had net losses since the beginning of fiscal year 2008. Our actual level of losses during our last fiscal year were unanticipated 12 months ago and resulted in decreases in our cash, cash equivalents and short-term investment balances. Our operating cash flows in fiscal year 2010 will be very dependent on a limited number of relatively new products.

If our liquidity continues to diminish, we may reach the point at which we operate at or close to the minimum cash levels necessary to support our current business operations, and we may be forced to reduce spending, research and development activities, marketing activities and other programs that are important to the future success of our business, including growing our business domestically and internationally. In addition, if our liquidity substantially decreases, it may affect our business relationships with our customers and/or our suppliers who may seek more restrictive payment terms, assurances regarding our ability to meet our obligations and to sustain regular business operations and other concessions. If this were to happen, our need for cash resources would be intensified.

Our ability to maintain required liquidity levels will depend significantly on factors such as:

To fund growth opportunities or if our liquidity continues to diminish, we may find it necessary or advisable to seek additional funding. Our corporate credit rating may make it difficult to obtain funding in the securities and credit markets as well as under our existing credit facilities. If we seek additional funding, adequate funds may not be available on favorable terms, or at all. If adequate funds are not available on acceptable terms, or at all, we may be unable to adequately fund our business plans and it could have a negative effect on our business, results of operations, operating cash flows and financial condition. In addition, if funds are available, the issuance of equity securities or securities convertible into equity could dilute the value of shares of our existing common stock and other equity securities and cause the market price of our common stock to fall. The issuance of additional debt or incurrence of borrowing could impose restrictive covenants in addition to those to which we are already subject under our existing credit facility, which could impair our ability to engage in certain business transactions.

Uncertainty and adverse changes in the economy could adversely affect our business and operating cash flows.

The current recessionary economic conditions and the possibility of consolidations or bankruptcies of companies have resulted in a tightening in the credit markets, a low level of liquidity in

many financial markets and a decrease in consumer confidence. The current recessionary economic conditions began during fiscal year 2008 and have worsened since then. We do not believe it is likely that these adverse economic conditions will improve significantly in the near term.

Because our products compete for a share of consumer disposable income and business spending, continued economic distress and uncertainty may reduce the purchasing power or influence the buying decisions of our customers and end users, which could decrease the number of products we are able to sell and put pressure on the prices of our products. Furthermore, as a result of the tightening of the credit markets, we may have increased exposure to material losses from bad debts. Key suppliers may become insolvent or may be unable to obtain credit to finance the development or manufacture of components under terms that are acceptable to us, or at all, which could result in delays in the delivery of our products and/or increased costs to us. As a result, these recessionary economic conditions and related factors, many of which are beyond our control, may adversely affect our business, results of operations, operating cash flows and financial condition.

The market for our products is volatile. Failure to adjust to changing market conditions or inability to scale our business may adversely affect our business, results of operations, operating cash flows and financial condition, particularly given our size, limited resources and lack of diversification.

Our future results of operations and operating cash flows depend substantially on the commercial success of smartphones in general and our smartphones in particular, including Palm Pre, Palm Pixi and products that are under development. For the three months ended August 31, 2009, revenues from sales of smartphones and related products constituted more than 95% of our consolidated revenues. If revenues from our smartphones fail to meet expectations our operating cash flows may suffer. The downturn in general economic conditions and the substantial decline in the stock market have led to reduced demand for a variety of goods and services, including many technology products. Recessionary economic conditions have created a challenging environment in the smartphone market, including declining average selling prices and increased competition. If we are unable to adequately respond to changes in demand for our products, our results of operations and operating cash flows could be adversely affected. In addition, as our products and product categories mature and face greater competition, and if these recessionary economic conditions continue to decline, or fail to improve, we could see a further decrease in the overall demand for our products or we may experience pressure on our product pricing to preserve demand for our products, which would adversely affect our margins, results of operations, operating cash flows and financial condition.

This reliance on the success of our industry and trends in our industry is compounded by the size of our organization, our focus on smartphone-related products and services and the limited number of smartphone product lines we currently have available. These factors also make us more dependent on investments of our limited resources. For example, we face many resource allocation decisions, such as: where to focus our research and development, geographic sales and marketing and partnering efforts; which aspects of our business to outsource; which operating systems and email solutions to support; and how to manage product life cycles and support among our products. Given the size of our organization and undiversified nature of our product lines, if our Palm Pre or other new products do not generate substantial and sustained market success and revenues, or if we otherwise do not appropriately invest our resources, our business, results of operations, operating cash flows and financial condition could be adversely affected.

Furthermore, as we attempt to grow our business both domestically and internationally, we will need to be able to scale our operations and infrastructure to support those efforts. Expansion will increase the complexity of our business and place a significant strain on our management, operations and financial and other resources. If we are unable to scale our operations and infrastructure

effectively, as a result of capital requirements or otherwise, our results of operations, operating cash flows and financial condition, as well as our ability to remain competitive in the smartphone market, may be adversely affected.

If we are unable to compete effectively with existing or new competitors, we could experience price reductions, reduced demand for our products and services, reduced margins and loss of market share. As a result, our business, results of operations, operating cash flows and financial condition would be adversely affected.

The markets for our products are highly competitive, and we expect increased competition and pressure on our average selling prices in the future, particularly as companies from established industry segments, such as mobile handset, personal computer and consumer electronics, enter these markets or increasingly expand and market their competitive product offerings or both.

Some of our competitors may devote greater resources to the development, promotion and sale of their products than we do. They may have lower costs and/or be better able to withstand lower prices in order to gain market share at our expense. They may be more diversified than we are and better able to leverage their other businesses, products and services to be able to accept lower returns in the smartphone market and gain market share. These competitors may also bring with them customer loyalties, which may limit our ability to compete regardless of any comparative advantage of our product offerings.

Some of our competitors or potential competitors possess capabilities developed over years of serving customers in their respective markets that might enable them to compete more effectively than we compete in certain segments. In addition, many of our competitors have significantly greater engineering, technical, manufacturing, sales, marketing and financial resources and capabilities than we have. These competitors may be able to respond more rapidly than we can to new or emerging technologies or changes in customer requirements, including introducing a greater number and variety of products than we can. They may also be in a better position financially or otherwise to acquire and integrate companies and technologies that enhance their competitive positions and limit our competitiveness.

Our devices compete with a variety of mobile devices. Our principal competitors in the mobile handset and smartphone market include Apple, Asustek, Dell, High Tech Computer or HTC, LG, Motorola, Nokia, Pantech, Personal Communications Devices or PCD, Research in Motion or RIM, Samsung and Sony-Ericsson. In addition, our products compete for a share of disposable income and business spending on consumer electronic and telecommunications products such as MP3 players, iPods, media/photo viewers, digital cameras, personal media players, digital storage devices, handheld gaming devices, GPS devices, netbooks, tablets, Mobile Internet Devices or MIDs, and other such devices.

Some of our competitors, such as Asustek, HTC and PCD, produce smartphones as wireless-carrier-branded devices in addition to their own branded devices. As technology advances, we also expect to compete with mobile phones without branded operating systems that synchronize with personal computers, as well as ultra-mobile personal computers, laptop computers, netbooks, tablets and MIDs with wide area network or data cards with voice over IP, or VoIP, and WiFi phones with VoIP.

Some competitors sell or license server, desktop and/or laptop computing products, software and/or recurring services in addition to mobile products. They may choose to market their mobile products at a discounted price or give them away for free with their other products or services, which could negatively affect our ability to compete.

A number of our competitors have longer and closer relationships with the senior management of business customers who decide which products and technologies will be deployed in their business.

Many competitors have larger and more established sales forces calling on wireless carriers and business customers. Therefore, they could contact a greater number of potential customers with more frequency. Consequently, these competitors could have a better competitive position than we have, which could result in wireless carriers and business customers deciding not to choose our products and services, which would adversely impact our revenues.

Successful new product introductions or enhancements by our competitors could cause intense price competition or make our products obsolete. To remain competitive, we must continue to invest significant resources in research and development, sales and marketing and customer support. We cannot be sure that we will have sufficient resources to make these investments or that we will be able to make the technological advances necessary to be competitive. Increased competition could result in price reductions, reduced demand for our products and services, increased expenses, reduced margins and loss of market share. Failure to compete successfully against current or future competitors could harm our business, results of operations, operating cash flows and financial condition.

We are highly dependent on wireless carriers for the success of our smartphone products.

The success of our business strategy and our smartphone products is highly dependent on our ability to establish new relationships and build on our existing relationships with domestic and international wireless carriers. Wireless carriers control which products to certify on their networks, offer to their customers and promote through price subsidies and marketing campaigns. Given the increased competition and price sensitivity in the smartphone market, wireless carrier and distributor price subsidies are essential to the success of our products and our ability to compete. Moreover, if wireless carriers move away from subsidizing the purchase of smartphones, this could significantly reduce the sales or growth rate of sales in our industry. The marketing dollars and efforts contributed by wireless carriers to advance and support our products are very important as we compete with limited capital resources against better-funded companies.

We cannot assure you that we will be successful in establishing new relationships or maintaining or advancing existing relationships with wireless carriers or that these wireless carriers will act in a manner that will promote the success of our smartphone products. Additional factors that are largely within the control of wireless carriers, but which are important to the success of our smartphone products, include:

For example, flat data rate pricing plans offered by some wireless carriers may represent some risk to our relationship with such wireless carriers. While flat data pricing helps customer adoption of the data services offered by wireless carriers and highlights the advantages of the data applications of our smartphone products, such plans may not allow our smartphones to contribute as much average revenue per user to wireless carriers as when they are priced by usage, and therefore reduces our differentiation from other, non-data devices in the view of the wireless carriers. In addition, if wireless carriers charge higher rates than consumers are willing to pay, the acceptance of our wireless solutions could be less than anticipated and our revenues and operating cash flows could be adversely affected.

Wireless carriers have substantial bargaining power as we enter into agreements with them. They may require contract terms that are difficult for us to satisfy and could result in higher costs to complete certification requirements and negatively impact our results of operations, operating cash flows and financial condition. Moreover, we do not have agreements with some of the wireless carriers with whom we do business internationally. In some cases, the agreements may be with third-party distributors and may not pass through rights to us or provide us with recourse or contact with the wireless carrier. The absence of agreements means that, with little or no notice, these wireless carriers could refuse to continue to purchase all or some of our products or change the terms under which they purchase our products. If these wireless carriers were to stop purchasing our products, we may be unable to replace the lost sales channel on a timely basis and our results of operations, operating cash flows and financial condition could be harmed.

In some cases, we may enter into exclusive relationships with wireless carriers to sell our products within a particular territory. For example, in the case of Palm Pre, and Palm Pixi, Sprint will have exclusive distribution rights in the United States for a limited period of time. Although there are benefits from exclusive arrangements, such arrangements eliminate our ability to make the products subject to the exclusivity period available through other wireless carriers during the exclusivity period, and may initially limit the sales of such products as a result.

Wireless carriers also significantly affect our ability to develop and launch products for use on their wireless networks. If we fail to address the needs of wireless carriers, identify new product and service opportunities or modify or improve our smartphone products in response to changes in technology, industry standards or wireless carrier requirements, our products could rapidly become less competitive or obsolete. If we fail to develop on a timely basis smartphone products that meet wireless carrier product planning cycles or fail to deliver sufficient quantities of products in a timely manner to wireless carriers, those wireless carriers may choose to emphasize similar products from our competitors and reduce their focus on our products, which would have a negative impact on our business, operating cash flows and financial condition.

Wireless carriers, who control most of the distribution and sale of and virtually all of the access for smartphone products, could commoditize smartphones, thereby reducing the average selling prices and margins for our smartphone products. In addition, if wireless carriers move away from subsidizing the purchase of smartphone products, this could significantly reduce the potential sales or growth rate of sales of smartphone products. These effects could have an adverse impact on our business, operating cash flows and financial condition.

We are dependent on a concentrated number of significant customers and the loss or credit failure of any of those customers could have an adverse effect on our business, operating cash flows and financial condition.

Our largest customer, Sprint, represented 85% of our revenues during the first quarter of fiscal year 2010 and 43% during fiscal year 2009. Our largest customers represented 60% of our revenues during fiscal year 2009, 65% during fiscal year 2008 and 56% during fiscal year 2007. We determine our largest customers in terms of revenues to be those who individually represent 10% or more of our total revenues for the period. We expect this trend of revenues concentration with our largest wireless carrier customers to continue, and at times increase, primarily due to our launch of multiple smartphone products with Sprint. We expect in the near term to continue to experience high levels of revenue concentration with Sprint. If Sprint or any other significant customer discontinues its relationship with us for any reason, or reduces or postpones current or expected purchases from us, it could have an adverse impact on our business, results of operations, operating cash flows and financial condition. Our ability to replace or find new large customers is necessarily limited due to the limited number of wireless carriers in many territories, including the United States, which is the country where we generate the majority of our revenues.

In addition, our largest customers in terms of outstanding customer accounts receivable balances accounted for 75% of our accounts receivable at the end of the first quarter of fiscal year 2010, compared to 72% of our accounts receivable at the end of fiscal year 2009, 61% of our accounts receivable at the end of fiscal year 2008 and 63% at the end of fiscal year 2007. We determine our largest customers in terms of outstanding customer accounts to be those who have outstanding customer accounts receivable balances at the period end of 10% or more of our total net accounts receivables. At the end of the first quarter of fiscal year 2010 and the end of fiscal year 2009, Sprint’s balance represented 38% and 46%, respectively, of our total customer accounts receivable balance. We expect this trend of significant credit concentration with our largest customers, particularly with wireless carriers, to continue, concentrating our bad debt risks. We routinely monitor the financial condition of our customers and review the credit history of each new customer.

While we believe that our allowances for doubtful accounts adequately reflect the credit risk of our customers, as well as historical trends and other economic factors, we cannot assure you that such allowances will be accurate or sufficient. If any of our significant customers defaults on its account, or if we experience significant credit expense for any reason, it could have an adverse impact on our business, results of operations, operating cash flows and financial condition.

We could be exposed to significant fluctuations in shipment volumes and revenues for our smartphone products based on our strategic relationships with wireless carriers.

Because of their large sales channels, wireless carriers may purchase large quantities of our products prior to launch so that the products are widely available. Reorders of products may fluctuate quarter to quarter, depending on end-user demand and inventory levels required by the wireless carriers. We have announced that our revenues for the second quarter of fiscal year 2010 are expected to be lower than revenues achieved in the first quarter of fiscal year 2010 as a result of timing and size of our new product and carrier launches and the continued decline in demand for our legacy products. As we develop new strategic relationships and launch new products with wireless carriers, our smartphone products-related shipment volumes and revenues could be subject to significant fluctuations based on the timing of wireless carrier product launches, wireless carrier inventory requirements, marketing efforts and our ability to forecast and satisfy wireless carrier and end-user demand.

If our products do not meet wireless carrier and governmental or regulatory certification or other requirements, we will not be able to compete effectively and our ability to generate revenues will suffer.

We are required to certify our products with governmental and regulatory agencies with the wireless carriers for use on their networks and to meet other requirements. These processes can be time consuming, could delay the offering of our smartphone products on wireless carrier networks and could affect our ability to timely deliver products to customers. For example, the Treo Pro was shipped to Sprint in the United States later than expected due to delays in certifying the Treo Pro on Sprint’s network. Wireless carriers may choose to offer, or consumers may choose to buy, similar products from our competitors and reduce their purchases of our products, which would have a negative impact on our smartphone products sales volumes, revenues and cost of revenues.

If we do not accurately forecast demand for our products, we could have costly excess production or inventories or we may not be able to secure sufficient or cost-effective quantities of our products or production materials. As a result, our revenues, gross profit and financial condition could be adversely impacted.

The demand for our products depends on many factors, including pricing and channel inventory levels, and is difficult to forecast due in part to variations in economic conditions, changes in consumer and business preferences, relatively short product life cycles, changes in competition, seasonality and reliance on key sales channel partners. It is particularly difficult to forecast demand by individual product. Significant unanticipated fluctuations in demand, the timing and disclosure of new product releases or the timing of key sales orders could result in costly excess production or inventories, liabilities for failure to achieve minimum purchase commitments or the inability to secure sufficient, cost-effective quantities of our products or production materials. This could adversely impact our revenues, gross profit and financial condition. For example, in fiscal year 2009, actual product shipments were lower than forecasted product sales. As a result, we incurred a net charge to cost of revenues of $16.1 million for purchase commitments with third-party manufacturers in excess of anticipated demand.

We depend on our suppliers, some of which are the sole source and some of which are our competitors, for certain components, software applications and elements of our technology. Our production or reputation could be harmed if these suppliers were unable or unwilling to meet our demand or technical requirements on a timely and/or a cost-effective basis.

Our products contain software and hardware, including liquid crystal displays, touch panels, memory chips, microprocessors, cameras, radios and batteries, which are procured from a variety of suppliers, including some who are our competitors. The cost, quality and availability of software and hardware are essential to the timely and successful development, production and sale of our device products. For example, components such as radio technologies and software such as email applications are critical to the functionality of our smartphones. Some components, such as radio frequency components, power management integrated circuits, cameras and certain discrete components are currently obtained from single or limited sources. Alternative sources are frequently not available in the short term or may be prohibitively expensive. In addition, even when we have multiple qualified suppliers, we may compete with other purchasers for allocation of scarce components. Some of our suppliers are or may become capacity-constrained in the short or long term due to high industry demand for some components and relatively long lead times to expand capacity. Some components come from companies with whom we compete, and some of our suppliers have significant relationships with our competitors. Under certain circumstances, such as the current recession, our suppliers could refuse to continue to supply all or some of the components that we require for our devices, change the terms under which they supply such components or go out of

business. If suppliers are unable or unwilling to supply or meet our demand for components, and if we are unable to obtain alternative sources or if the price for alternative sources is prohibitive, our ability to maintain timely and cost-effective production of our products will be harmed. If our suppliers were to change the terms under which they supply components for our products, our manufacturing costs and cost of revenues could increase. While we may have contractual remedies under supply or manufacturing agreements, our business and reputation could be harmed. Furthermore, these contractual remedies may be difficult to enforce against suppliers located outside the United States, and we do not have direct, or in some cases even indirect, contractual relationships with some of the component suppliers for our devices. Shortages may affect the timing and volume of production for some of our products as well as increase our costs due to premium prices paid for those components and longer-term commitments to ensure availability of those components.

If we are unable to obtain key technologies from third parties on a timely basis and free from errors or defects, we may have to delay or cancel the release of certain products or features in our products or incur increased costs.

Our ability to release and sell our products, as well as our reputation, could be harmed if the third-party technologies are not delivered to us in a timely manner, on acceptable business terms or contain errors or defects that are not discovered and fixed prior to release of our products and we are unable to obtain alternative technologies on a timely and cost effective basis to use in our products. As a result, our product shipments could be delayed, our offering of features could be reduced or we may need to divert our development resources from other business objectives, any of which could adversely affect our reputation, business, results of operations and operating cash flows.

We rely on third parties, some of which are our competitors, to design, manufacture, distribute, warehouse and support our products. Our reputation, revenues and operating cash flows could be adversely affected if these third parties fail to meet their performance obligations.

We outsource some of our hardware design and certain software development to third-party manufacturers, some of whom compete with us and some of whom have significant relationships with our competitors. We depend on their design expertise, and we rely on them to design our products at satisfactory quality levels. If our third-party manufacturers fail to provide quality hardware design or software development, our reputation and revenues could suffer. These third-party designers and manufacturers have access to our intellectual property, which increases the risk of infringement or misappropriation of such intellectual property. In addition, these third parties may claim ownership rights in certain of the intellectual property developed for our products, which may limit our ability to have these products manufactured by others.

We outsource all of our manufacturing requirements to third-party manufacturers at their international facilities. In general, our products are manufactured by sole source providers, and Palm Pixi will be manufactured by a new sole source provider with whom we are in the process of finalizing our arrangements. We depend on these third parties to produce a sufficient volume of our products in a timely fashion and at satisfactory quality levels. In addition, we generally rely on our third-party manufacturers to place orders with suppliers for the components they need to manufacture our products and to track appropriately the shipment and inventory of those components with our orders. If they fail to place timely and sufficient orders with suppliers and appropriately maintain component inventories, or if they are unable to change, on a timely and cost-effective basis based on our changing forecasts of demand, our revenues and cost of revenues could suffer. Significant unanticipated fluctuations in demand of our products could result in costly excess production of inventories or additional non-cancelable purchase commitments. Our reliance on third-party manufacturers in foreign countries exposes us to risks that are not in our control, including outbreaks of disease, economic

slowdowns, labor disruptions, trade restrictions, political conflicts and other events that could result in quarantines, shutdowns or closures of our third-party manufacturers or their suppliers. The cost, quality and availability of third-party manufacturing operations are essential to the successful production and sale of our products. If our third-party manufacturers fail to produce quality products on time and in sufficient quantities, our reputation, business, results of operations and operating cash flows could suffer.

These manufacturers could refuse to continue to manufacture all or some of the units of our devices that we require or change the terms under which they manufacture our devices. If these manufacturers were to stop manufacturing our devices, we may be unable to replace the lost manufacturing capacity on a timely basis and our operating cash flows could be harmed. If these manufacturers were to change the terms under which they manufacture for us, our manufacturing costs and cost of revenues could increase. While we may have contractual remedies under manufacturing agreements, our business and reputation could be harmed. Furthermore, these contractual remedies may be difficult to enforce against manufacturers located outside of the United States. In addition, many of our contractual relationships are with the manufacturers of our products, and not with component suppliers. In the absence of a contract with the manufacturer that requires it to obtain and pass through warranty and indemnity rights with respect to component suppliers, we may not have recourse to any third party in the event of a component failure.

We may choose or be compelled from time to time to transition to or add new third-party manufacturers. If we transition the manufacturing of any product to a new manufacturer, there is a risk of disruption in manufacturing and our revenues, results of operations and operating cash flows could be adversely impacted. The learning curve and implementation associated with adding a new third-party manufacturer may adversely impact our revenues, results of operations and operating cash flows.

We rely on third-party distribution and warehouse services providers to warehouse and distribute our products. Our contract warehouse facilities are physically separated from our contract manufacturing locations. This requires additional lead-time to deliver products to customers. If we are shipping products near the end of a fiscal quarter, this extra time could result in us not meeting anticipated shipment volumes for that quarter, which may negatively impact our revenues for that fiscal quarter. Any disruption of distribution facility services could have a negative impact on our revenues, results of operations and operating cash flows. Moreover, as a result of economic conditions or other factors, our distribution and warehouse services providers may close or move their facilities with little notice to us, which could cause disruption in our ability to deliver products. With little or no notice, these distribution and warehouse services providers could refuse to continue to provide distribution and warehouse services for all or some of our devices, fail to provide the quality of services and security that we require or change the terms under which they provide such services.

Changes in transportation schedules or the timing of deliveries due to shipping problems, wireless carrier financial difficulties, inaccurate forecasts of demand, acts of nature or other business interruptions could cause transportation delays and increase our costs for both receipt of inventory and shipment of products to our customers. If these types of disruptions occur, our reputation, results of operations and operating cash flows could be adversely impacted.

We outsource most of the warranty support, product repair and technical support for our products to third-party providers, which are located around the world. We depend on their expertise, and we rely on them to provide satisfactory levels of service. If our third-party providers fail to provide consistent quality service in a timely manner and sustain customer satisfaction, our reputation, results of operations and operating cash flows could suffer.

Third parties have claimed, and may claim in the future, that we are infringing their intellectual property, and we could suffer significant litigation or licensing expenses or be prevented from selling products regardless of whether these claims are successful.

In the course of our business, we frequently receive offers to license or claims of infringement of patents held by other parties. Given our focus on smartphone products, we have received, and expect to continue to receive, communications from holders of patents related to mobile communication standards and other industry standards. We evaluate the validity and applicability of these patents and determine in each case whether we must negotiate licenses to incorporate or use implicated technologies in our products. Third parties may claim that our customers or we are directly or indirectly infringing on their intellectual property rights, and we may be found to directly or indirectly infringe on those intellectual property rights. We may be required to pay significant damages and obligated either to refrain from the further sale of our products or to license the right to sell our products on an ongoing basis. Several lawsuits are currently pending against us involving such claims. We may be unaware of intellectual property rights of others that may cover some of our technology, products and services. We may not have direct contractual relationships with some of the component, software and applications providers for our products, and we may not have indemnification, warranties or other protection with respect to such components, software or applications. Furthermore, intellectual property claims against us or our suppliers may cause us or our customers to delay the introduction of or to stop using our devices or applications for our devices. As a result, our revenues, business, results of operations and operating cash flows may be adversely affected.

Any litigation regarding patents or other intellectual property could be costly and time consuming and could divert the attention of our management and key personnel from our business operations. The complexity of the technology involved and the uncertainty of litigation generally increase the risks associated with intellectual property litigation. Moreover, patent litigation has increased due to the increased numbers of cases asserted by intellectual property licensing entities as well as increasing competition and overlap of product functionality in our markets. Intellectual property licensing entities generally do not generate products or services. As a result, we cannot deter their infringement claims based on counterclaims that they infringe patents in our portfolio or by entering cross-licensing arrangements. Claims of intellectual property infringement may also require us to enter into costly royalty or license agreements or to indemnify our customers, licensees, original design manufacturers, or ODMs, and other third parties with whom we have relationships. However, we may not be able to obtain royalty or license agreements on terms acceptable to us or at all. We also may be subject to significant damages or injunctions against the development and sale of our products. With respect to patent litigation, these risks are exacerbated by the lack of a clear and consistent legal standard for assessing damages in such litigation.

We are subject to general commercial litigation and other litigation claims as part of our operations, and we could suffer significant litigation expenses in defending these claims and could be subject to significant damage awards or other remedies.

In the course of our business, we receive consumer protection claims, general commercial claims related to the conduct of our business and the performance of our products and services, employment claims and other litigation claims. Litigation resulting from these claims could be costly and time-consuming and could divert the attention of management and key personnel from our business operations. The complexity of the technology involved and the uncertainty of consumer, commercial, employment and other litigation increase these risks. We also may be subject to significant damages or equitable remedies regarding the development and sale of our products and operation of our business.

If third parties infringe our intellectual property or if we are unable to secure and protect our intellectual property, we may expend significant resources enforcing our rights or suffer competitive injury.

Our success depends in large part on our proprietary technology and other intellectual property rights. We have a significant investment in the rights to the Palm brand and related trademarks and will continue to invest in that brand and in our patent portfolio.

We rely on a combination of patents, copyrights, trademarks and trade secrets, confidentiality provisions and licensing arrangements to establish and protect our proprietary rights. Our intellectual property, particularly our patents, may not provide us a significant competitive advantage. If we fail to protect or to enforce our intellectual property rights successfully, our competitive position could suffer, which could harm our results of operations and operating cash flows.

Our pending patent and trademark applications for registration may not be allowed, or others may challenge the validity or scope of our patents or trademarks, including patent or trademark applications or registrations. Even if our patents or trademark registrations are issued and maintained, these patents or trademarks may not be of adequate scope or benefit to us or may be held invalid and unenforceable against third parties.

We may be required to spend significant resources to monitor and police our intellectual property rights. Effective policing of the unauthorized use of our products or intellectual property is difficult. Litigation may be necessary in the future to enforce our intellectual property rights. Intellectual property litigation is not only expensive, but time-consuming, regardless of the merits of any claim, and could divert attention of our management and key employees from operating our business. It could also harm our reputation among developer communities. Despite our efforts, we may not be able to detect infringement and may lose competitive position in the market before we do so. In addition, competitors may design around our technology or develop competing technologies. Intellectual property rights may also be unavailable, unenforceable or limited in some foreign countries, which could make it easier for competitors to capture market share.

In the past, there have been leaks of proprietary information associated with our intellectual property. We have implemented a security plan to reduce the risk of future leaks of proprietary information; however, we cannot assure you that the security plan will be able to prevent the risk of all leaks of proprietary information. In addition, we may not be successful in preventing those who have obtained our proprietary information through past leaks from using our technology to produce competing products. We may not be successful in preventing future leaks of proprietary information. Even without leaks, our competitors may attempt to copy the look and feel of our products or our Palm webOS, reducing our ability to capitalize on the opportunity of our innovation or increasing our costs to challenge their infringement.

Despite our efforts to protect our proprietary rights, existing laws, contractual provisions and remedies afford only limited protection. Intellectual property lawsuits are subject to inherent uncertainties due to, among other things, the complexity of the technical issues involved. We cannot assure you that we will be successful in asserting intellectual property claims. Attempts may be made to copy or reverse engineer aspects of our products or to obtain and use information that we regard as proprietary. Accordingly, we cannot assure you that we will be able to protect our proprietary rights against unauthorized third-party copying or use. The unauthorized use of our technology or of our proprietary information by competitors could have an adverse effect on our ability to sell our products.

We do business in countries whose laws may not provide protection of our intellectual property rights to the same extent as the laws of the United States, which may make it more difficult for us to protect our intellectual property.

We have customers and relationships with suppliers and ODMs in many countries around the world. However, many of these countries do not address misappropriation of intellectual property to the same extent as the United States or deter others from developing similar, competing technologies or intellectual property. Effective protection of patents, copyrights, trademarks, trade secrets and other intellectual property may be unavailable or limited in some foreign countries. As a result, we may not be able to effectively prevent competitors in these regions from infringing our intellectual property rights, which would reduce our competitive advantage and ability to compete in those regions and negatively impact our business.

We may not be successful in developing the infrastructure for our new applications catalog or establishing content that is attractive to our end users.

We announced in May 2009 that we were developing the infrastructure for a new applications catalog to complement our Palm webOS product offerings. The launch of the applications catalog requires a substantial investment of internal resources for its development, including procurement of the site and its support network, design and implementation of the developer and consumer interfaces and advertising costs. An increase in our online commercial presence may also require significant investment in security measures to ensure that the transmission of confidential data, such as payment information, is secure and that our servers and network are protected from damage due to intruders, computer viruses, earthquakes, power losses, telecommunications failures and similar events. Applications tied to the internet may also require an interface with third parties over which we have no control. If we are not able to successfully develop, launch, support or market the applications catalog on a timely basis, or if necessary third-party interfaces are not available to support the applications, the sales of our Palm webOS products may suffer, we may not be able to generate revenues to offset our implementation costs, and our future business, operating cash flows and financial condition may be adversely affected.

The applications catalog is dependent on the recruitment of third-party software developers to create software that will be attractive to our Palm webOS products’ end users. These third-party software developers may earn revenues when their applications are downloaded by our end users. Because we operate in a competitive market and our applications catalog is still in its early stages with a limited amount of current users, we may not be successful in convincing developers to develop applications for our catalog. Many developers may already have significant relationships with our competitors and may be unwilling to develop applications for Palm webOS products. Further, even if we are successful in recruiting developers, there is no assurance that they will create products that are an attractive complement to our Palm webOS products and will be purchased by our end users. If our applications catalog is unable to attract customers, our results of operations, operating cash flows and financial condition may be adversely affected.

The occurrence or perception of a breach of our security measures or privacy policies, or an inappropriate disclosure of confidential or personal information, could harm our business.

Our Palm webOS and related service offerings rely on the transmission of business-critical, proprietary and confidential information for end users and provide Palm with access to confidential or personal information and data. In addition, information stored in our smartphone products is subject to viruses and security breaches related to wireless data transmission. If the security measures that we or our business partners have implemented are breached or if there is an inappropriate disclosure of confidential or personal information or data, including as a result of a security breach relating to hardware or software, we could be exposed to litigation or regulatory action, possible liability and

statutory sanctions. Even if we were not held liable, a security breach or inappropriate disclosure of confidential or personal information and/or data could harm our reputation, and even the perception of security vulnerabilities in our products could lead some customers to reduce or delay future purchases or to purchase competitive products or services. In addition, we may be required to invest additional resources to protect Palm against damages caused by these actual or perceived disruptions or security breaches in the future.

The collection, storage, transmission, use and distribution of user data and personal information could give rise to liabilities or additional costs as a result of laws, governmental regulations and carrier and other customer requirements or differing views of personal privacy rights.

We transmit and store a large volume of data, including personal information, in the course of supporting our Palm webOS products and related service offerings. This information is increasingly subject to legislation and regulations in numerous jurisdictions around the world. Government actions are typically intended to protect the privacy and security of personal information as well as the collection, storage, transmission, use and distribution of such information.

We could be adversely affected if domestic or international legislation or regulations are expanded to require changes in our business practices or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively affect our business. If we are required to allocate significant resources to modify our Palm webOS service offerings to enable enhanced security of the personal information that we transmit and store, our results of operations, operating cash flows and financial condition may be adversely affected.

In addition, because various foreign jurisdictions have different laws and regulations concerning the storage and transmission of personal information, we may face requirements that pose compliance challenges in new international markets that we seek to enter. Such variation could subject us to costs, liabilities or negative publicity that could impair our ability to expand our operations into some countries and therefore limit our future growth.

Our wireless carrier or other customers may have differing expectations or impose particular requirements for the collection, storage, processing and transmittal of user data or personal information in connection with our Palm webOS product and service offerings. Such expectations or requirements could subject us to costs, liabilities or negative publicity, and limit our future growth. If we are required to allocate significant resources to modify our Palm webOS product and service offerings to meet such requirements, we may incur additional costs to meet such requirements, and our time to market with various product and service offerings may be adversely affected.

As privacy and data protection have become more sensitive issues, we may also become exposed to potential liabilities related to the privacy of personal information. These and other privacy concerns, including security breaches, could adversely impact our business, results of operations, operating cash flows and financial condition.

As a result of the Credit Agreement we entered into, we have a significant amount of debt. We may not be able to generate sufficient cash to service or repay all of our indebtedness, including the Term Loan, and we may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful. Our substantial indebtedness could adversely affect our business, results of operations, cash flows and financial condition.

In October 2007, we entered into a Credit Agreement, which governs a Term Loan and a Revolver. As a result of this Credit Agreement, we have significant indebtedness and substantial debt service requirements. Our ability to meet our payment and other obligations under our indebtedness depends on our ability to generate significant cash flows in the future. Our ability to generate cash is

subject to our future operating performance and the demand for, and price levels of, our current and future products and services. However, our ability to generate cash is also subject to prevailing economic and competitive conditions and to general economic, financial, competitive, regulatory and other factors beyond our control. There is no assurance that our business will generate cash flows from operations. Given the uncertainty in the credit market, we may not be able to borrow under or otherwise utilize the Revolver if the lenders refuse or fail to satisfy their commitments under the Revolver. In addition, our Credit Agreement obligates us to meet certain conditions precedent before borrowings under the Revolver or issuances of letters of credit under the Credit Agreement are made, and we may not be able to meet those conditions on the date of any requested borrowing or letter of credit issuance. Therefore, we cannot assure you that future borrowings will be available to us under the Revolver or any new credit facilities, or otherwise, in an amount sufficient to enable us to meet our payment obligations under our indebtedness and to fund other liquidity needs, including operations. If our cash flows and capital resources are insufficient to fund our debt service or repayment obligations, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital, restructure or refinance all or a portion of our indebtedness, including the Term Loan, or incur additional debt. There is no assurance that we would be able to take any of these actions on commercially reasonable terms or at all. There is also no assurance that these actions would be successful and permit us to meet our scheduled debt service or repayment obligations or that these actions would be permitted under the terms of our existing or future debt agreements. Moreover, the Credit Agreement restricts our ability to dispose of assets and use the proceeds from the disposition. In the absence of such cash flow and capital resources, we could face substantial liquidity problems.

If we cannot make scheduled payments on our debt, or if we otherwise breach the Credit Agreement or related agreements, we will be in default and, as a result:

Although covenants contained in the Credit Agreement governing the Term Loan and the Revolver will limit our ability and the ability of certain of our present and future subsidiaries to incur certain additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the indebtedness that we could incur in compliance with these restrictions could be substantial. In addition, the Credit Agreement will not prevent certain of our subsidiaries from incurring indebtedness. To the extent that we or our subsidiaries incur additional indebtedness, the related risks that we now face could intensify.

Our indebtedness may limit our ability to adjust to changing market conditions, place us at a competitive disadvantage compared to our competitors and adversely affect our business, results of operations, operating cash flows and financial condition.

The Credit Agreement governing the Term Loan and the Revolver contains covenants that may adversely affect our ability to, among other things, finance future operations or capital needs or engage in other business activities. Further, the Credit Agreement contains negative covenants limiting our ability and the ability of our subsidiaries to, among other things, incur debt, grant liens, make acquisitions, make certain restricted payments, make investments, sell assets and enter into sale and lease back transactions. Any additional debt we may incur in the future may subject us to further

covenants. Even if we are able to comply with all of the applicable covenants, the restrictions on our ability to manage our business in our sole discretion could adversely affect our business by, among other things, limiting our ability to take advantage of financings, mergers, acquisitions and other corporate opportunities that we believe would be beneficial to us.

Our ability to comply with covenants contained in the Credit Agreement governing the Term Loan and Revolver and any agreements governing other indebtedness may be affected by events beyond our control, including prevailing economic, financial and industry conditions. Our failure to comply with the covenants contained in any of the debt agreements described above, for any reason, in addition to other specified events, could result in a default under such debt agreements. In addition, if any such default is not cured or waived, the default could result in an acceleration of debt under the Credit Agreement and our other debt instruments that contain cross-acceleration or cross-default provisions, which could require us to repay or repurchase debt, together with accrued interest, prior to the date it otherwise is due and that could adversely affect our financial condition. Upon a default or cross-default, the collateral agent, at the direction of the lenders under the Credit Agreement could proceed against the collateral, which includes substantially all of our assets.

Variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

Under our Credit Agreement, our Term Loan and Revolver bear interest at variable rates and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the principal amount of such indebtedness remained the same. Interest on the Term Loan is based on LIBOR or the Alternate Base Rate (higher of Prime Rate or Federal Funds Effective Rate plus 0.50%). An increase in the interest rate payable on the Term Loan could have an adverse effect on our results of operations, cash flows, financial condition and ability to make payments on the Term Loan.

Subscription accounting guidance applicable to our current and future Palm webOS products, including Palm Pre and the recently announced Palm Pixi, will result in a significant deferral of associated revenues and related direct product cost of revenues. Changes in generally accepted accounting principles may significantly impact our results of operations and financial condition.

As required by generally accepted accounting principles in the United States, we account for Palm webOS products using a subscription accounting model, because we may periodically provide new software features free of charge to customers of our Palm webOS products. We will continue to account for our non-Palm webOS products and services in accordance with our current practices. Subscription accounting spreads the impact of the product’s contribution to our overall revenues and cost of revenues over the currently estimated economic life of the product of 24 months. As a result, only a small portion of the revenues and related cost of revenues associated with these products will be recognized at the time of shipment. A large proportion, and in most cases the largest proportion, of the revenues and related cost of revenues associated with these products in a given quarter will result from the recognition of deferred revenues and deferred direct product cost of revenues relating to these products sold during previous quarters. Certain other related period cost of revenues will continue to be expensed as incurred.

To the extent our product mix shifts toward a higher concentration of Palm webOS products, a larger portion of our revenues and cost of revenues will be deferred. Comparisons of these Palm webOS revenues and margins with those associated with our historical non-Palm webOS products or with the revenues of competitors that are not subject to subscription accounting may be unfavorable, could be misunderstood by investors and may adversely affect our stock price if investors believe we are not achieving certain financial performance targets. Our Palm webOS product revenues and gross

profit may continue to be lower than, or difficult to compare to, our competitors who do not use a subscription accounting model. A decline in sales of these products in any one quarter will not necessarily be fully reflected in the revenues in that quarter, but it will negatively affect our revenues in future quarters. In addition, we may be unable to timely adjust our cost structure to reflect the changes in revenues. Accordingly, the effect of significant downturns in sales and market acceptance of our products may not be fully reflected in our results of operations until future periods. Subscription accounting will also make it difficult for us to rapidly increase our revenues through additional sales of our Palm webOS products in any period, as revenues must be recognized over the applicable subscription term. Also, our historical financial information may not be a reliable indicator of future results due to subscription accounting for Palm webOS products.

Accounting authorities continually consider proposals to adopt new and revised accounting standards. For example, accounting authorities are currently considering several proposals, including a revenue recognition proposal that, if adopted, will apply to smartphone products that, under current accounting standards, are required to be recognized on a subscription basis. The impact of such proposals has not been determined. Changes in accounting rules and standards have in the past and may in the future have a significant effect on our reported results of operations and financial condition under generally accepted accounting principles. We are unable to predict the impact, if any, or the likelihood of adoption of the numerous proposals that are currently under consideration by accounting authorities. Furthermore, we are unable to predict the effect that such proposals may have on investors’ ability to understand our business, results of operations and financial condition.

We incorporate open source software into our Palm webOS software platform and related applications and services, including certain open source code which is governed by the GNU General Public License, or GPL, GNU Lesser General Public License, or LGPL, and other open source licenses. There is very little case law interpreting the terms and conditions of many of these licenses, and there is a risk that these licenses could be construed in a manner that might impose unanticipated conditions or restrictions on our ability to commercialize our products as we intend. In such event, we could be required to: seek licenses from third parties in order to continue offering our products; make certain portions of our proprietary code generally available in source code form (for example, proprietary code that links to certain open source code); re-engineer our products; discontinue the sale of our products if re-engineering cannot be accomplished on a cost-effective and timely basis; or become subject to other consequences. Any of these consequences could adversely affect our business, results of operations, operating cash flows and financial condition.

Our success largely depends on our ability to hire, retain, integrate and motivate sufficient numbers of qualified personnel, including senior management. Our strategy and our ability to innovate, design and produce new products, sell products, maintain operating margins and control expenses depend on key personnel that may be difficult to replace.

Our success depends on our ability to attract and retain highly skilled personnel, including senior management and international personnel. Our chairman and chief executive officer, Jonathan Rubinstein, is particularly important to our ability to succeed. From time to time, we experience turnover in some of our senior management positions. We compensate our employees through a combination of salary, bonuses, benefits and equity compensation. Recruiting and retaining skilled personnel, including software and hardware engineers, is highly competitive, particularly in the San Francisco Bay Area where we are headquartered. If we fail to provide competitive compensation to our employees, it will be difficult to retain, hire and integrate qualified employees and contractors, and we may not be able to maintain and expand our business. If we do not retain our senior managers or other key employees for any reason, we risk losing institutional knowledge, experience, expertise and other benefits of continuity as well as the ability to attract and retain other key employees. In

addition, we must carefully balance the growth of our employee base with our current infrastructure, management resources and anticipated operating cash flows. If we are unable to manage the growth of our employee base, particularly software and hardware engineers, we may fail to develop and introduce new products successfully and in a cost effective and timely manner. If our revenue growth or employee levels vary significantly, our operating cash flows and financial condition could be adversely affected. Volatility or lack of positive performance in our stock price may also affect our ability to retain key employees, many of whom have been granted stock options, other equity incentives or both. Palm’s practice has been to provide equity incentives to its employees through the use of stock options and other equity vehicles, but the number of shares available for new options and other forms of securities grants is limited. We may find it difficult to provide competitive stock option grants or other equity incentives, and our ability to hire, retain and motivate key personnel may suffer.

Recently and in past years, we have initiated reductions in our workforce of both employees and contractors to align our employee base with our anticipated revenue base or with our areas of focus. We have also seen some turnover in our workforce. These reductions have resulted in reallocations of duties, which could result in employee and contractor uncertainty. Reductions in our workforce could make it difficult to attract, motivate and retain employees and contractors, which could affect our ability to deliver our products in a timely fashion and adversely affect our business.

We rely on third parties to sell and distribute our products, and we rely on their information to manage our business. Disruption of our relationship with these channel partners, changes in their business practices, their failure to provide timely and accurate information or conflicts among our channels of distribution could adversely affect our business, results of operations, operating cash flows and financial condition.

The wireless carriers, distributors, retailers and resellers who sell and distribute our products also sell products offered by our competitors. If our competitors offer our sales channel partners more favorable terms, have more products available to meet their needs or utilize the leverage of broader product lines sold through the channel, those wireless carriers, distributors, retailers and resellers may de-emphasize or decline to carry our products. In addition, certain of our sales channel partners could decide to de-emphasize the product category that we offer in exchange for other product categories that they believe provide higher returns. If we are unable to maintain successful relationships with these sales channel partners or to expand our distribution channels, our business will suffer.

Because we sell our products primarily to wireless carriers, distributors, retailers and resellers, we are subject to many risks, including risks related to product returns, either through the exercise of contractual return rights or as a result of our strategic interest in assisting them in balancing inventories. In addition, these sales channel partners could modify their business practices, such as inventory levels, or seek to modify their contractual terms, such as return rights or payment terms. Unexpected changes in product return requests, inventory levels, payment terms or other practices by these sales channel partners could negatively impact our business, results of operations, operating cash flows and financial condition.

We rely on wireless carriers, distributors, retailers and resellers to provide us with timely and accurate information about their inventory levels as well as sell-through of products purchased from us. We use this information as one of the factors in our forecasting process to plan future production and sales levels, which in turn influences our financial forecasts. We also use this information as a factor in determining the required levels of some of our financial reserves. If we do not receive this information on a timely and accurate basis, our results of operations and financial condition may be adversely impacted.

Distributors, retailers and traditional resellers experience competition from Internet-based resellers that distribute directly to end users, and there is also competition among Internet-based

resellers. These varied sales channels could cause conflict among our channels of distribution, which could harm our business, revenues, results of operations and operating cash flows.

We rely on third parties to manage and operate our e-commerce web store and related telesales call center, and disruption to these sales channels could adversely affect our revenues and operating cash flows.

We outsource the operations of our e-commerce web store and related telesales call centers to third parties. We depend on their expertise and rely on them to provide satisfactory levels of service. If these third-party providers fail to provide consistent quality service in a timely manner and sustain customer satisfaction, our operations and revenues could suffer. If these third-parties were to stop providing these services, we may be unable to replace them on a timely basis and our operating cash flows could be harmed. In addition, if these third parties were to change the terms and conditions under which they provide these services, our selling costs could increase.

We use third parties to provide significant operational and administrative services, and our ability to satisfy our customers and operate our business could suffer if the level of services is interrupted or does not meet our requirements.

We use third parties, some of which are our competitors, to provide services such as data center operations, desktop computer support, facilities services and certain accounting services. Should any of these third parties fail to deliver an adequate level of service on a timely basis, our business could suffer. Some of our operations rely on electronic data systems interfaces with third parties or on the Internet to communicate information. Interruptions in the availability and functionality of systems interfaces or the Internet could adversely impact the operations of these systems and consequently our business, results of operations and operating cash flows.

We are subject to increasingly stringent laws, standards and other regulatory requirements, and the costs of compliance or failure to comply may adversely impact our business, operating cash flows and financial condition.

We must comply with a variety of laws, standards and other requirements governing, among other things, health and safety, hazardous materials usage, packaging and environmental matters. Our products must obtain regulatory approvals and satisfy other regulatory concerns in the various jurisdictions where they are manufactured and/or sold. Many of our products must meet standards governing, among other things, interference with other electronic equipment and human exposure to electromagnetic radiation. Failure to comply with such requirements can subject us to liability, additional costs, reputational harm and, in severe cases, prevent us from selling our products in certain jurisdictions. For example, we are subject to laws and regulations that restrict the use of lead and other hazardous substances and require us as producers of electrical and electronic equipment to assume responsibility for collecting, treating, recycling and disposing of our products when they have reached the end of their useful life. Failure to comply with these and other applicable environmental requirements can result in fines, civil or criminal sanctions and third-party claims. If products we sell in Europe are found to contain more than the permitted percentage of lead or other restricted substances, it is possible that we could be forced to recall the products, which could result in gaps in supply, substantial replacement costs, contract damage claims from customers and reputational harm. We are now and expect in the future to become subject to additional laws, standards and other regulatory requirements in the United States, China, Europe and other parts of the world.

As a result of these varying and developing requirements throughout the world, we are now facing increasingly complex procurement and design challenges, which, among other things, require us to incur additional costs identifying suppliers and contract manufacturers who can provide, and

otherwise obtain, compliant materials, parts and end products. It may be necessary to re-design our products so that they comply with these and the many other requirements applicable to them. We cannot assure you that our costs of complying with and our liabilities arising from current and future health and safety, environmental and other laws, standards and regulatory requirements will not adversely affect our business, operating cash flows or financial condition.

Allegations of health risks associated with electromagnetic fields and wireless communications devices, and the lawsuits and publicity relating to them, regardless of merit, could adversely impact our business, operating cash flows and financial condition.

There has been public speculation about possible health risks to individuals from exposure to electromagnetic fields from base stations and exposure to radio signals from the use of mobile devices. Government agencies, international health organizations and other scientific bodies are currently conducting research into these issues. In addition, other mobile device companies have been named in individual plaintiff and class action lawsuits alleging that radio emissions from mobile phones have caused or contributed to brain tumors and that the use of mobile phones poses a health risk. There has been significant scientific research by various independent research bodies that has indicated that exposure to electromagnetic fields or to radio signals, at levels within the limits prescribed by public health authority standards and recommendations, presents no adverse effect to human health. Nevertheless, we cannot assure you that other studies will not suggest or identify a link between electromagnetic fields or radio signals and adverse health effects or that we will not be the subject of future lawsuits relating to this issue. Adverse factual developments or lawsuits against us, or even the perceived risk of adverse health effects from smartphones or other handheld devices, could adversely impact sales, subject us to costly litigation and/or harm our reputation, business, operating cash flows and financial condition.

Our future results could be harmed by economic, political, regulatory and other risks associated with international sales and operations.

Because we sell our products worldwide and most of the facilities where our devices are manufactured, distributed and supported are located outside the United States, our business is subject to risks associated with doing business internationally, such as:

In addition, we are subject to changes in demand for our products resulting from exchange rate fluctuations that make our products relatively more or less expensive in international markets. If exchange rate fluctuations occur, our business and operating cash flows could be harmed by decreases in demand for our products or reductions in margins.

While we sell our products in many countries, we have limited experience with sales and marketing in some countries. There can be no assurance that we will be able to market and sell our products in all of our targeted international markets. If our international efforts are not successful, our business growth and results of operations could be harmed.

We may be required to record impairment charges in future quarters as a result of the decline in value of our investments in auction rate securities.

We hold a variety of interest-bearing ARS that have failed to settle on their respective settlement dates since fiscal year 2008 and are not currently trading. Consequently, the investments are not currently liquid and we will not be able to access these funds until a future auction of these investments is successful or a buyer is found outside of the auction process. We may decide to hold these investments for a long time or to sell them at a substantial discount if we need liquidity. Maturity dates for these ARS investments range from 2015 to 2052.

The valuation of our investment portfolio, including our investments in ARS, is subject to uncertainties that are difficult to predict. Factors that may impact its valuation include changes to credit ratings of the securities as well as to the underlying assets supporting these securities, rates of default of the underlying assets, underlying collateral value, discount rates, liquidity and ongoing strength and quality of credit markets. Due to continued deterioration, we expect to record additional impairment charges in future quarters related to our ARS investments.

We are required to adjust our Series C derivatives to estimated fair value on a quarterly basis, which will affect our results of operations.

Our Series C derivatives are subject to mark-to-market accounting treatment, and the change in fair market value of the derivatives is reported in our statement of operations each quarter, which has resulted in and may in the future result in reporting significant gains or losses related to these derivatives. For example, in the first quarter of fiscal year 2010 the increase in fair market values of our Series C derivatives resulted in a non-cash charge of $27.4 million to our results of operations. Because the estimated fair value of these derivatives is affected by our stock price, fluctuations in our stock price—which has historically been volatile—may significantly affect our financial results.

Our ability to utilize our net operating losses may be limited if cumulative changes in ownership of Palm exceed 50%.

We have substantial U.S. federal income tax net operating loss carryforwards. If over a rolling three-year period, the cumulative change in our ownership exceeds 50%, our ability to utilize our net operating losses to offset future taxable income may be limited. We have exceeded this 50% cumulative change threshold since our initial public offering in 2000. While no prior occurrence had a material adverse effect on our ability to use our net operating losses, exceeding the 50% cumulative change threshold during a time when our capitalization is low could have a more substantive effect. Recent financing transactions have raised the cumulative change in our ownership within the most recent period, and we have not yet determined the amount of the cumulative change in our ownership resulting from this offering. The effect of such transactions on our cumulative change in ownership may limit or otherwise negatively affect the benefits of engaging in financing and other transactions in the future. Furthermore, it is possible that transactions in our stock that may not be within our control may cause us to exceed the 50% cumulative change threshold and may impose a limitation on the utilization of our net operating losses in the future. In the event the usage of these net operating losses is subject to limitation and we are profitable, our future cash flows could be adversely impacted due to our increased tax liability.

We may pursue strategic acquisitions and investments which could have an adverse impact on our business if they are unsuccessful.

We have made acquisitions in the past and will continue to evaluate other acquisition opportunities that could provide us with additional product or service offerings or with additional industry expertise, assets and capabilities. Acquisitions could result in difficulties integrating acquired operations, products, technology, internal controls, personnel and management teams and result in the diversion of capital and management’s attention away from other business issues and opportunities. If we fail to successfully integrate acquisitions, including timely integration of internal controls to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, our business could be harmed. In addition, our acquisitions may not be successful in achieving our desired strategic objectives, which would also cause our business to suffer. Acquisitions can also lead to large non-cash charges that can have an adverse effect on our results of operations as a result of write-offs for items such as future impairments of intangible assets and goodwill or the recording of stock-based compensation. In addition, from time to time we make strategic venture investments in other companies that provide products and services that are complementary to ours. If these investments are unsuccessful, this could have an adverse impact on our results of operations, operating cash flows and financial condition.

Business interruptions, including those that may not directly impact us, could adversely affect our business.

Our operations and those of our suppliers and customers are vulnerable to interruption by fire, hurricanes, earthquake, power loss, telecommunications failure, computer viruses, computer hackers, terrorist attacks, wars, military activity, labor disruptions, health epidemics and other natural disasters and events beyond our control. Such events and threats could also have an adverse impact on the United States and world economy in general, and consumer confidence and spending in particular, which could harm our business, results of operations, operating cash flows and financial condition.

In addition, the business interruption insurance we carry may not cover, in some instances, or be sufficient to compensate us fully for losses or damages—including, for example, loss of market share and diminution of our brand value, reputation and customer loyalty—that may occur as a result of such events. Any such losses or damages incurred by us could have an adverse effect on our business.

Risks Related to this Offering and Ownership of Our Common and Preferred Stock

Our common stock price may be subject to significant fluctuations and volatility.

The market price of our common stock has been subject to significant fluctuations since the date of our initial public offering. Since the beginning of fiscal year 2009, our closing stock price has ranged from $1.42 on December 5, 2008 to $17.07 on September 22, 2009. These fluctuations could continue. Among the factors that could affect our stock price are:

The stock markets in general, and the markets for high technology stocks in particular, have experienced high volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock.

If securities or industry analysts change to a negative outlook regarding our stock or our operating results do not meet their expectations, our stock price could decline. The trading market for our common stock is influenced by the research and reports that industry or securities analysts publish about us or our products. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if one or more of the analysts who cover our company downgrade our stock or if our operating results do not meet their expectations, our stock price could decline.

As of August 31, 2009, the Series B Preferred Stock and Series C Preferred Stock owned by Elevation are convertible into 27% of our outstanding common stock on an as-converted basis and vote on an as-converted basis with our common stock on all matters other than the election of those directors elected solely by the holders of our common stock. Additionally, Elevation holds 8.2 million shares of common stock and warrants to purchase an additional 3.6 million shares of Palm common stock, which, if exercised, would bring its total ownership percentage to 33% as of August 31, 2009. Elevation has indicated an interest in purchasing $35 million of our shares in this offering, which could cause its total ownership percentage to change. The voting rights of Elevation on an as-converted and an as-exercised basis are capped at 39.9% of the outstanding common stock, and Elevation is prohibited from converting its Series B Preferred Stock and Series C Preferred Stock and exercising its warrants to the extent such conversion or exercise would cause the 39.9% voting limitation to be exceeded. Notwithstanding these voting, conversion and exercise limitations, Elevation has the ability to significantly influence the outcome of any matter submitted for the vote of Palm stockholders. Elevation may have interests that diverge from, or even conflict with, those of Palm or its other stockholders.

Subject to certain exceptions, Elevation has the right under the terms of an amended and restated stockholders’ agreement between Palm and Elevation, or the Amended and Restated Stockholders’ Agreement, to maintain its ownership interest in Palm.

In addition, the terms of the Series B Preferred Stock and Series C Preferred Stock and the Amended and Restated Stockholders’ Agreement provide that Elevation has the right to designate a percentage of Palm’s board of directors proportional to Elevation’s ownership position in Palm. Currently, Elevation has the right to designate, and has designated, three of the members of our eight-member board based on its current ownership percentage.

Certain elements of our relationship with Elevation and our executive officers may discourage other parties from trying to acquire Palm.

The ownership position and governance rights of Elevation could discourage a third party from proposing a change of control or other strategic transaction concerning Palm. Of the eight members of our board of directors, three are Elevation designees and one is an executive officer of Palm. These governance arrangements may discourage a third party from pursuing such transactions with Palm. Also, employment arrangements with our executive officers provide for termination benefits, including acceleration of the vesting of certain equity awards if they terminate their employment for good reason or are terminated without cause following a change of control or within three months prior to a change of control of Palm. Further, in connection with certain change of control transactions in which Elevation maintains a beneficial ownership percentage of at least 7.5% of the surviving entity, it is entitled to retain a seat on the board of directors of the surviving entity. As a result of these factors, our common stock could trade at prices that do not reflect a “takeover premium” to the same extent as do the stocks of similarly situated companies that do not have a stockholder with an ownership interest as large as Elevation’s ownership interest.

We may not have the ability to finance the mandatory repurchase offer pursuant to the terms of the Series B Preferred Stock and/or the Series C Preferred Stock.

If certain change of control transactions occur, we will be required to make an offer to repurchase up to all of the then outstanding shares of Series B Preferred Stock and, subject to consent from the lenders under the Credit Agreement, Series C Preferred Stock, at the option and election of the holders thereof. We will have the option to pay the repurchase price in cash or, subject to certain conditions, publicly traded shares of the acquiring entity in the change of control transaction. The cash repurchase price per share is 101% of the purchase price plus accrued and unpaid dividends. The repurchase price per share, if paid in publicly traded shares of the acquiring entity, is 105% of the purchase price plus accrued and unpaid dividends. Our failure to pay the repurchase price in respect of all tendered shares for any reason, including the absence of funds legally available for such payment, would require us to pay conditional dividends, which represent a cash dividend at an annual rate equal to the prime rate of JPMorgan Chase Bank N.A. plus 4%, on each share of Series B Preferred Stock and Series C Preferred Stock. Conditional dividends will accrue and cumulate until the date on which we pay the entire repurchase price, and will be payable quarterly. For so long as conditional dividends are accruing, neither we nor any of our subsidiaries may declare or pay any dividends on our common stock, or repurchase or redeem any shares of our common stock. This may adversely affect the rights of our existing stockholders and the market price of our common stock. These repurchase requirements may also delay or make it more difficult for others to obtain control of us.

Provisions in our charter documents and Delaware law and our adoption of a stockholder rights plan may delay or prevent acquisition of us, which could decrease the value of shares of our common stock.

Our certificate of incorporation and bylaws and Delaware law contain provisions that could make it more difficult for a third party to acquire us without the consent of our board of directors. These provisions include a classified board of directors and limitations on actions by our stockholders by written consent. Delaware law also imposes some restrictions on mergers and other business combinations between us and any holder of 15% or more of our outstanding common stock (including Series B Preferred Stock and Series C Preferred Stock outstanding on an as-converted basis). In addition, our board of directors has the right to issue preferred stock without stockholder approval, which could be used to dilute the stock ownership of a potential hostile acquirer. Although we believe these provisions provide for an opportunity to receive a higher bid by requiring potential acquirers to negotiate with our board of directors, these provisions apply even if the offer may be considered beneficial by some stockholders.

Our board of directors adopted a stockholder rights plan, pursuant to which we declared and paid a dividend of one right for each share of common stock outstanding as of November 6, 2000. Unless redeemed by us prior to the time the rights are exercised, upon the occurrence of certain events, the rights will entitle the holders to receive, upon exercise of the rights, shares of our common stock, or shares of common stock of an acquiring entity having a value equal to twice the then-current exercise price of the right. The issuance of the rights could have the effect of delaying or preventing a change in control of us.

We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and the repayment of indebtedness and do not anticipate declaring or paying any cash dividends for the foreseeable future. Moreover, the Credit Agreement imposes restrictions on our ability to declare and pay dividends.

We estimate our net proceeds will be $313.1 million (or $359.9 million if the underwriters exercise their over-allotment option in full), after deducting underwriting discounts and commissions and estimated offering expenses. See “Capitalization” and “Underwriting.”

We intend to use the net proceeds we receive from this offering for working capital and general corporate purposes.

Our common stock is quoted on the Nasdaq Global Select Market under the symbol “PALM.” The following table sets forth the high and low closing sale prices of our common stock as reported on the Nasdaq Global Select Market during the periods indicated.

The last reported sale price for our common stock as reported on the Nasdaq Global Select Market is set forth on the cover page of this prospectus supplement. On August 28, 2009, there were approximately 3,369 holders of record of our common stock.

During the second quarter of fiscal year 2008, in connection with a recapitalization transaction involving the sale of our preferred stock and the incurrence of new debt, we paid a $9.00 per share one-time cash distribution to our stockholders of record as of October 24, 2007, resulting in an approximately $9.00 per share decrease in our stock price. In March 2000, we paid a $150 million cash dividend to 3Com Corporation from the proceeds of our initial public offering. Except for the foregoing, we have not paid and do not anticipate paying cash dividends or distributions in the future.

In connection with this offering, the underwriters have agreed to purchase from us an aggregate of 20,000,000 shares of our common stock issued in this offering. Elevation and Mr. McNamee have informed us of their intention to purchase an aggregate of $37 million of the shares being offered in this offering for investment purposes. We will not pay any commissions and the underwriters will not receive any discounts on the shares sold in this offering to Elevation or Mr. McNamee.

We estimate our net proceeds will be $313.1 million (or $359.9 million if the underwriters exercise their over-allotment option in full), net of underwriting discounts and commissions and estimated offering expenses.

The following table sets forth our cash, cash equivalents and short-term investments and our capitalization as of August 28, 2009:

You should read this table in conjunction with “Use of Proceeds” and with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and our consolidated financial statements and the related notes incorporated by reference in this prospectus supplement and the accompanying prospectus.

The following description of our capital stock is based on our restated certificate of incorporation, as amended and including the certificates of designation of Series B Preferred Stock and Series C Preferred Stock (the “Restated Certificate of Incorporation”), our bylaws, as amended (the “Bylaws”) and applicable provisions of law. We have summarized certain portions of the Restated Certificate of Incorporation and Bylaws below. The summary is not complete. The Restated Certificate of Incorporation and Bylaws that we have filed with the SEC and have been listed as exhibits to our Form 10-Q for the quarter ended August 28, 2009 are incorporated by reference in this registration statement. You should read the Restated Certificate of Incorporation and Bylaws for the provisions that are important to you.

Certain provisions of the Delaware General Corporation Law (the “DGCL”), the Restated Certificate of Incorporation, the Bylaws and rights plan summarized in the following paragraphs may have an anti-takeover effect. This may delay, defer or prevent a tender offer or takeover attempt that a stockholder might consider in its best interests, including those attempts that might result in a premium over the market price for the shares held by such stockholder.

Our Restated Certificate of Incorporation authorizes us to issue 2,000,000,000 shares of common stock, $0.001 par value per share, and 125,000,000 shares of preferred stock, $0.001 par value per share.

As of August 28, 2009 there were 142,329,477 shares of common stock outstanding which were held of record by 3,369 stockholders. The holders of shares of our common stock, subject to the preferential rights of the holders of shares of our preferred stock, are entitled to dividends when and as declared by our board of directors. The holders of our common stock have one vote per share on all matters submitted to a vote of the stockholders (other than certain matters that are only subject to approval by the holders of the Series B Preferred Stock and/or the holders of the Series C Preferred Stock). The holders of the Series B Preferred Stock and the Series C Preferred Stock are generally entitled to vote on all matters on which the holders of the common stock are entitled to vote except for the election of those directors elected solely by the holders of the common stock. The holders of our common stock have the right to share pro rata in the net assets of Palm in liquidation after payment of any amounts due to creditors and in respect of any preferred stock. Holders of shares of our common stock are not entitled as a matter of right to any preemptive or subscription rights and are not entitled to cumulative voting for directors. All outstanding shares of common stock are, and the shares of common stock issued upon any conversion, exercise or exchange of any debt or equity securities providing for such conversion, exercise or exchange will be, fully paid and nonassessable. Our common stock is listed on the Nasdaq Global Select Market. The transfer agent and registrar for our common stock is Computershare Trust Company, N.A. Computershare’s address is 250 Royall Street, Canton Massachusetts 02021, and its telephone number is (781) 575-2000.

Our Bylaws provide that the annual meeting of stockholders shall be held each year on a date as designated by our board of directors and as stated in a written notice, which must be given to each stockholder either personally or by mail, telecopy, telegram or other electronic or wireless means at least 10 days prior to any stockholder meeting.

We are authorized to issue 125,000,000 shares of preferred stock, $0.001 par value, in one or more series, with such designations and such relative voting, dividends, liquidation, conversion and

other rights, preferences and limitations as are stated in the Restated Certificate of Incorporation. We have designated 2,000,000 shares of our preferred stock as Series A Participating Preferred Stock, none of which have been issued, in connection with the stockholders rights plan as described under “Rights Plan” below. We have designated 325,000 shares of our preferred stock as Series B Convertible Preferred Stock, all of which have been issued, as described under “Preferred Stock—Series B Convertible Preferred Stock” below. We have designated 100,000 shares of our preferred stock as Series C Convertible Preferred Stock, all of which have been issued and of which 51,000 were still outstanding as of August 28, 2009, as described under “Preferred Stock—Series C Convertible Preferred Stock” below. The authorized but unissued shares of preferred stock may be issued pursuant to resolution by our board of directors without the vote of holders of our capital stock, subject to certain limitations imposed by law or our Bylaws. The description of preferred stock set forth in this prospectus supplement contains only a summary of the terms of such series. You should refer to the applicable certificate of designation for such series of preferred stock for complete information with respect to such preferred stock.

On October 24, 2007, Elevation invested $325.0 million in Palm in exchange for 325,000 shares of Palm’s Series B Preferred Stock. On January 12, 2009, in connection with the investment of $100.0 million by Elevation in exchange for 100,000 Series C Units (as defined below) we amended and restated the Certificate of Designation of Series B Convertible Preferred Stock (the “Series B Certificate of Designation”) to conform certain powers and rights and qualifications, limitations and restrictions of the Series B Preferred Stock to the Series C Preferred Stock. As of August 28, 2009, Elevation holds all 325,000 shares of outstanding Series B Preferred Stock.

Pursuant to the Series B Certificate of Designation, as amended, the holders of the Series B Preferred Stock have various rights and preferences as follows:

On January 9, 2009, Elevation invested $100.0 million in Palm in exchange for 100,000 Series C Units, each of which consist of one share of Palm’s Series C Preferred Stock and a warrant exercisable for the purchase of 70 shares of Palm’s common stock. On March 13, 2009, we elected to cause Elevation to sell 49,000 Series C Units, or 49% of Elevation’s initial investment, which units were converted into shares of common stock which were sold in a public offering. As of August 28, 2009, Elevation holds all 51,000 outstanding Series C Units.

Pursuant to the Certificate of Designation of Series C Convertible Preferred Stock (the “Series C Certificate of Designation”), the holders of the Series C Preferred Stock have various rights and preferences as follows:

Our Restated Certificate of Incorporation and Bylaws include the following provisions, among others, that could discourage potential acquisition proposals and could delay or prevent a change of control of Palm:

In addition, our Restated Certificate of Incorporation provides that, so long as Elevation Partners and its affiliates beneficially own 15% or more of the total voting power of our equity securities entitled to vote on general matters, certain change of control transactions with Elevation Partners or its affiliates will require the approval of a majority of the voting power of Palm’s voting stock not beneficially owned by Elevation Partners or its affiliates.

We are subject to Section 203 of the DGCL (“Section 203”). In general, Section 203 prohibits a publicly held Delaware corporation from engaging in various “business combination” transactions with any interested stockholder for a period of three years following the date of the transactions in which the person became an interested stockholder, unless:

A “business combination” is defined to include mergers, asset sales and other transactions resulting in financial benefit to a stockholder. In general, an “interested stockholder” is a person who, together with affiliates and associates, owns (or within three years, did own) 15% or more of a corporation’s voting stock. The statute could prohibit or delay mergers or other takeover or change in control attempts with respect to Palm and, accordingly, may discourage attempts to acquire Palm even though such a transaction may offer Palm stockholders the opportunity to sell their stock at a price above the prevailing market price.

The following description of our rights plan is based substantially on the Preferred Stock Rights Agreement dated as of September 25, 2000, between Palm and Computershare Trust Company, N.A., as successor to Equiserve Trust Company, N.A. and Fleet National Bank, as Rights Agent (the “Rights Agreement”), and the amendments to the Rights Agreement dated as of November 12, 2004, June 1, 2007, October 24, 2007, December 22, 2008 and January 9, 2009, respectively (the “Amendments to the Rights Agreement”). We have summarized certain portions of our rights plan. The summary is not complete. The Rights Agreement was filed with the SEC on Form 8-A on October 23, 2000, and amendments thereto were filed on November 18, 2004, June 5, 2007, October 30, 2007, January 2, 2008 and January 13, 2009, and are incorporated by reference into this prospectus supplement and the accompanying prospectus. You should read the Rights Agreement and Amendments to the Rights Agreement for the provisions that are important to you. In the following description, we refer to our Rights Agreement and the Amendments to the Rights Agreement collectively as the “rights agreement.”

On September 21, 2000, our board of directors adopted a stockholder rights plan and declared a distribution of one preferred stock purchase right for each share of our common stock outstanding on November 6, 2000, and each share of common stock issued after that date. The rights are transferable with our common stock until they become exercisable but are not exercisable until the distribution date described in the plan. Generally, the plan distribution date will not occur until a person or group (an “Acquiring Person”) acquires or makes a tender offer for 15 percent or more of our outstanding common stock, including both shares of common stock outstanding and shares of common stock issuable upon conversion of the Series B Preferred Stock and Series C Preferred Stock outstanding. The rights expire on November 6, 2010 unless we redeem them at an earlier date. The expiration date may be extended by our board. When a right becomes exercisable, its holder is entitled to purchase from us 1/1000th of a share of Series A Participating Preferred Stock at a purchase price of $110.00, subject to adjustment in certain circumstances since entry into the Rights Agreement.

Until the plan distribution date, the purchase rights will be evidenced by the certificates for common stock registered in the names of holders of our common stock. As soon as practical following the plan distribution date, we will mail separate certificates evidencing the rights to common stock holders of record.

If any person or group acquires 15 percent or more of our common stock, including both shares of common stock outstanding and shares of common stock issuable upon conversion of the Series B Preferred Stock and Series C Preferred Stock outstanding, the rights holders, other than the Acquiring Person and its affiliates, will be entitled to receive upon exercise, that number of shares of common stock that at the time have a market value equal to twice the purchase price of the right.

If we are acquired in a business combination, the rights holders, other than the Acquiring Person and its affiliates, will be entitled to acquire, for the purchase price, that number of shares of common stock of the acquiring corporation that, at the time, have a market value equal to twice the purchase price of the purchase right.

Our board has the right to redeem the purchase rights in certain circumstances for $0.001 per share, subject to adjustment in certain circumstances since entry into the Rights Agreement. Until a right is exercised, rights holders have no rights as holders of our common stock, including the right to vote and to receive dividends. The rights agreement includes anti-dilution provisions designed to prevent efforts to diminish the effectiveness of the rights. The terms of the rights agreement may be amended in any respect without the consent of the rights holders on or prior to the plan distribution date; thereafter, the terms of the rights agreement may be amended without the consent of rights holders in order to cure any ambiguities or to make changes which do not adversely affect the interests of rights holders (other than any Acquiring Person and its affiliates).

We amended our rights plan in 2007, 2008 and 2009 in connection with the purchase of Series B Preferred Stock and Series C Preferred Stock by Elevation. In particular, Elevation may beneficially own more than 15% of our common shares outstanding without causing a triggering event under the rights plan, so long as its ownership percentage does not exceed the standstill limit contained in the Stockholders’ Agreement. Moreover, if Elevation enters into any agreement, arrangement or understanding with a third party with respect to the permitted purchase or sale of any of our equity securities, then, for purposes of the rights agreement, (i) Elevation shall not be deemed to beneficially own any of our equity securities held by the third party (other than the securities that are the subject of the agreement or arrangement) and (ii) neither the third party nor any of its affiliates shall be deemed to beneficially own any of our equity securities held by Elevation (other than the securities that are the subject of the agreement or arrangement). Additionally, if any of our equity securities held by Elevation are subject to a permitted pledge or contractual encumbrance resulting from the incurrence of indebtedness from a bank or financial institution, then, for purposes of the rights agreement, (i) Elevation shall not be deemed to beneficially own any of our equity securities held by such bank or financial institution (other than the securities that are the subject of the pledge or encumbrance) and (ii) neither such bank or financial institution, nor any of its affiliates, shall be deemed to beneficially own any of our equity securities pledged by Elevation, except to the extent such securities are acquired by such bank or financial institution as a result of a foreclosure thereon.

The rights plan is designed to protect our stockholders in the event of unsolicited offers to acquire us and other coercive takeover tactics, which, in our board’s opinion, would impair its ability to represent our stockholders’ interests. The rights plan may make an unsolicited takeover more difficult or less likely to occur or may prevent a takeover, even though such takeover could offer our stockholders the opportunity to sell their stock at a price above the prevailing market rate and could be favored by a majority of our stockholders.

This description of the rights agreement is qualified in its entirety by reference to the full text of the Rights Agreement, as amended by the Amendments to the Rights Agreement.

The following is a general discussion of the material U.S. federal income and estate tax consequences of the ownership and disposition of our common stock by a beneficial owner that is a “Non-U.S. Holder,” other than a Non-U.S. Holder that owns, or has owned, actually or constructively, more than 5% of our common stock. A “Non-U.S. Holder” is a person or entity that, for U.S. federal income tax purposes, is a:

A “Non-U.S. Holder” generally does not include a nonresident alien individual who is present in the United States for 183 days or more in the taxable year of disposition of our common stock. Such an individual is urged to consult his or her own tax adviser regarding the U.S. federal income tax consequences of the sale, exchange or other disposition of our common stock.

If an entity that is classified as a partnership for U.S. federal income tax purposes holds our common stock, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Partnerships holding our common stock and partners in such partnerships are urged to consult their tax advisers as to the particular U.S. federal income tax consequences of holding and disposing of our common stock.

This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), and administrative pronouncements, judicial decisions and final, temporary and proposed Treasury Regulations, changes to any of which subsequent to the date of this prospectus supplement may affect the tax consequences described herein. This discussion does not address all aspects of U.S. federal income and estate taxation that may be relevant to Non-U.S. Holders in light of their particular circumstances and does not address any tax consequences arising under the laws of any state, local or foreign jurisdiction. Prospective holders are urged to consult their tax advisers with respect to the particular tax consequences to them of owning and disposing of our common stock, including the consequences under the laws of any state, local or foreign jurisdiction.

As discussed under “Price Range of Common Stock and Dividends” above, we do not currently expect to pay dividends. In the event that we do pay dividends, dividends paid to a Non-U.S. Holder of our common stock generally will be subject to withholding tax at a 30% rate or a reduced rate specified by an applicable income tax treaty. In order to obtain a reduced rate of withholding, a Non-U.S. Holder will be required to provide an Internal Revenue Service Form W-8BEN certifying its entitlement to benefits under a treaty.

If a Non-U.S. Holder is engaged in a trade or business in the United States, and if dividends paid to the Non-U.S. Holder are effectively connected with the conduct of this trade or business, the Non-U.S. Holder, although exempt from the withholding tax discussed in the preceding paragraph, will generally be taxed in the same manner as a U.S. person, subject to an applicable income tax treaty providing otherwise, except that the Non-U.S. Holder will be required to provide us with a properly executed Internal Revenue Service Form W-8ECI in order to claim an exemption from withholding. A non-U.S. corporation receiving effectively connected dividends may also be subject to an additional “branch profits tax” imposed at a rate of 30% (or a lower treaty rate).

A Non-U.S. Holder generally will not be subject to U.S. federal income tax on gain realized on a sale or other disposition of our common stock unless:

We believe that we are not, and do not anticipate becoming, a U.S. real property holding corporation.

If a Non-U.S. Holder is engaged in a trade or business in the United States and gain recognized by the Non-U.S. Holder on a sale or other disposition of our common stock is effectively connected with a conduct of such trade or business, the Non-U.S. Holder will generally be taxed in the same manner as a U.S. person, subject to an applicable income tax treaty providing otherwise. Non-U.S. Holders whose gain from dispositions of our common stock may be effectively connected with a conduct of a trade or business in the United States are urged to consult their own tax advisers with respect to the U.S. tax consequences of the ownership and disposition of our common stock, including the possible imposition of a branch profits tax.

Information returns will be filed with the Internal Revenue Service in connection with payments of dividends on our common stock. Unless the Non-U.S. Holder complies with certification procedures to establish that it is not a U.S. person, information returns may be filed with the Internal Revenue Service in connection with the proceeds from a sale or other disposition of our common stock and the Non-U.S. Holder may be subject to U.S. backup withholding on dividend payments on our common stock or on the proceeds from a sale or other disposition of our common stock. The certification procedures required to claim a reduced rate of withholding under a treaty described above will satisfy the certification requirements necessary to avoid backup withholding as well. The amount of any backup withholding from a payment to a Non-U.S. Holder will be allowed as a credit against such holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is timely furnished to the Internal Revenue Service.

Individual Non-U.S. Holders and entities the property of which is potentially includible in such an individual’s gross estate for U.S. federal estate tax purposes (for example, a trust funded by such an individual and with respect to which the individual has retained certain interests or powers), should note that, absent an applicable treaty benefit, our common stock will be treated as U.S. situs property subject to U.S. federal estate tax.

Under the terms and subject to the conditions in an underwriting agreement between us and the underwriters named below, we have agreed to sell to the underwriters, and each of underwriters have severally agreed to purchase from us the shares of common stock, set forth opposite its name in the table below. Goldman, Sachs & Co. and J.P. Morgan Securities Inc. are the representatives of the underwriters.

The underwriters are offering the shares of common stock subject to their acceptance of the shares of common stock from us and subject to prior sale. The underwriting agreement provides that the underwriters’ obligation to pay for and accept delivery of the shares of common stock offered in this prospectus supplement are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the shares of common stock offered by this prospectus supplement if any such shares are taken. However, the underwriters are not required to take or pay for the shares of common stock covered by the over-allotment option to purchase 3,000,000 additional shares described below.

The following table shows the per share and total underwriting discounts and commissions to be paid to the underwriters by us. Such amounts are shown assuming both no exercise and full exercise of the underwriters’ over-allotment option to purchase 3,000,000 additional shares.

At our request, the underwriters have reserved for sale, at the public offering price, an aggregate of $37 million of the shares offered in this prospectus supplement for Elevation and Mr. McNamee. The number of shares available for sale to the general public will be reduced to the extent Elevation or Mr. McNamee purchases such reserved shares. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered in this prospectus.

The underwriters initially propose to offer part of the shares of common stock directly to the public at the public offering price listed on the cover page of this prospectus and part to certain dealers at a price that represents a concession not in excess of $0.39 a share under the public offering price. The underwriters may allow, and dealers may reallow, a concession not to exceed $0.10 per share on sales to other dealers. After the initial offering of the shares of common stock, the offering price and other selling terms may from time to time be varied by the representatives. The offering of the shares by the underwriters is subject to receipt and acceptance, and subject to the underwriters’ right to reject, any order, in whole or in part.

We have granted an option to the underwriters to purchase up to an additional 3,000,000 shares of common stock at a price equal to the public offering price set forth on the cover of this prospectus supplement, less the underwriting discounts. The underwriters may exercise this option by giving

written notice not later than 30 days from the date of this prospectus supplement solely to cover over-allotments. If the underwriters’ over-allotment option is exercised in full, the total price to the public would be $373,750,000, the total underwriters’ discounts and commissions would be $13,470,000 and total proceeds to us, net of estimated expenses, would be $359,940,000.

The estimated offering expenses payable by us, exclusive of the underwriting discounts and commissions, are approximately $340,000. The underwriters have agreed to reimburse us for certain expenses incurred in connection with this offering.

The underwriters have informed us that they do not intend sales to discretionary accounts to exceed five percent of the total number of shares of common stock offered by them.

Our common stock is listed on the Nasdaq Global Select Market under the symbol “PALM.”

Subject to certain exceptions, we, Elevation and our executive officers and directors who have terms continuing after our 2009 annual stockholder meeting have agreed that, without first obtaining the written consent of the underwriters, we and they will not during the 60-day period after the date of this prospectus supplement, or 90-day period after the date of this prospectus supplement in the case of our executive officers and directors:

With respect to us, the lock-up does not apply to issuances under our employee benefit plans or the filing of a registration statement on Form S-8. In addition, the lock-up agreements signed by our executive officers and directors do not apply to:

provided that in the case of either of the third, fourth and fifth bullets, no filing under Section 16(a) of the Exchange Act, reporting a reduction in beneficial ownership of shares of common stock, shall be required or shall be voluntarily made in connection with subsequent sales of common stock or other securities acquired in such open market transactions during the 90-day period.

The representatives in their sole discretion may release any of the securities subject to the lock-up agreement at any time without notice.

In order to facilitate the offering of the common stock, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the common stock. Specifically, the underwriters may sell more shares than they are obligated to purchase under the underwriting agreement, creating a short position. A short sale is covered if the short position is no greater than the number of shares available for purchase by the underwriters under their over-allotment option to purchase additional shares from us in the offering. The underwriters can close out a covered short sale by exercising the over-allotment option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out a covered short sale, the underwriters will consider, among other things, the open market price of shares compared to the price available under the over-allotment option to purchase additional shares granted to them. The underwriters may also sell shares in excess of the over-allotment option to purchase additional shares from us in the offering, creating a naked short position. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in this offering. As an additional means of facilitating this offering, the underwriters may bid for, and purchase, shares of common stock in the open market to stabilize the price of the common stock. These activities may raise or maintain the market price of the common stock above independent market levels or prevent or retard a decline in the market price of the common stock. The underwriters are not required to engage in these activities and may end any of these activities at any time.

The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.

Purchases to cover short positions and stabilizing purchases, as well as other purchases by the underwriters for their own accounts, may have the effect of preventing or retarding a decline in the market price of the shares. They may also cause the price of the shares to be higher than the price that would otherwise exist in the open market in the absence of these transactions. The underwriters may conduct these transactions on the Nasdaq Global Select Market, in the over-the-counter market or otherwise. If the underwriters commence any of these transactions, they may discontinue them at any time.

We and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act of 1933, as amended.

The underwriters or their affiliates have provided and may provide in the future financial advisory services to us in the ordinary course of business, for which they may receive customary fees and commissions. Affiliates of J.P. Morgan Securities Inc. are lenders under our senior secured term loan.

Certain legal matters will be passed upon for Palm by Davis Polk & Wardwell LLP, Menlo Park, California. Certain legal matters will be passed upon for the underwriters by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto, California.

The consolidated financial statements and the related financial statement schedule, incorporated in this prospectus supplement by reference from the Company’s Annual Report on Form 10-K, and the effectiveness of the Company’s internal control over financial reporting have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports (which report relating to the consolidated financial statements and financial statement schedule expresses an unqualified opinion and includes an explanatory paragraph relating to the Company’s adoption of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an Interpretation of FASB No. 109), which are incorporated herein by reference. Such consolidated financial statements and financial statement schedule have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.

We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document that we file at the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website at www.sec.gov, from which interested persons can electronically access our SEC filings, including the registration statement of which this prospectus supplement forms a part and the exhibits and schedules thereto.

The SEC allows us to “incorporate by reference” the information we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this prospectus supplement, and information that we file later with the SEC will automatically update and supersede this information. We incorporate by reference the documents listed below, and all documents subsequently filed with the SEC pursuant to Section 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), prior to the termination of the offering under this prospectus supplement:

Any statement contained in a previously filed document incorporated by reference into this prospectus supplement and the accompanying prospectus is deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus supplement, or in a subsequently filed document also incorporated by reference herein, modifies or supersedes that statement.

You may request a copy of these filings at no cost, by writing or telephoning us at: 950 West Maude Avenue, Sunnyvale, CA 94085, Attention: Investor Relations, (408) 617-8825, email: investor.relations@palm.com. Information about us, including our SEC filings, is also available at our website at www.palm.com. However, the information on our website is not a part of this prospectus supplement.

Palm was a well-known seasoned issuer as defined in Rule 405 under the Securities Act within 60 days of the date on which Palm filed its most recent Annual Report on Form 10-K.

The following are types of securities that may be offered and sold by Palm, Inc. or by selling security holders under this prospectus from time to time:

The securities may be offered by us or by selling security holders in amounts, at prices and on terms determined at the time of the offering. The securities may be sold directly to you, through agents, or through underwriters and dealers. If agents, underwriters or dealers are used to sell the securities, we will name them and describe their compensation in a prospectus supplement. You should read this prospectus and any prospectus supplement carefully before you invest.

We will describe in a prospectus supplement, which must accompany this prospectus, the securities we are offering and selling, as well as the specific terms of the securities. Those terms may include:

Our Common Stock is quoted on the Nasdaq Global Select Market under the ticker symbol PALM. On October 30, 2008, the reported last sale price on the Nasdaq Global Select Market for our Common Stock was $3.69.

Investing in these securities involves certain risks. See “Item 1A–Risk Factors” beginning on page 13 of our Annual Report on Form 10-K for the year ended May 30, 2008, which is incorporated by reference herein.

Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

You should rely only on the information contained in or incorporated by reference in this prospectus, in any supplement hereto or in any related free-writing prospectus. We have not authorized anyone to provide you with different information. We are not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information contained in or incorporated by reference in this prospectus is accurate as of any date other than the date on the front of this prospectus. The terms “Palm,” “we,” “us,” and “our” refer to Palm, Inc. and its consolidated subsidiaries except where expressly indicated or the context otherwise requires.

SUMMARY

The Company

Palm, Inc. is a leading provider of mobile products that enhance the lifestyle of individual users and business customers worldwide. Our leadership results from creating thoughtfully integrated technologies that better enable people to stay connected with their family, friends and colleagues, access and share the information that matters to them most and manage their daily lives on the go. Palm offers Treo™ and Centro™ smartphones, handheld computers and accessories through a network of wireless carriers, as well as retail and business outlets worldwide. The company began operations in 1992 and is incorporated in Delaware.

For a description of our business, financial condition, results of operations and other important information regarding us, see our filings with the SEC incorporated by reference in this prospectus. For instructions on how to find copies of these and our other filings incorporated by reference in this prospectus, see “Where You Can Find More Information.”

About this Prospectus

This prospectus is part of a registration statement that we filed with the SEC utilizing a “shelf” registration process. Under this shelf process, we or selling security holders may sell any combination of the securities described in this prospectus in one or more offerings. This prospectus provides you with a general description of the securities we or selling security holders may offer. Each time we sell securities, we will provide a prospectus supplement that will contain specific information about the terms of that offering. The prospectus supplement may also add, update or change information contained in this prospectus. You should read both this prospectus and any prospectus supplement together with additional information described under the heading “Where You Can Find More Information.”

We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document that we file at the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website at www.sec.gov, from which interested persons can electronically access our SEC filings, including the registration statement of which this prospectus forms a part and the exhibits and schedules thereto.

The SEC allows us to “incorporate by reference” the information we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this prospectus, and information that we file later with the SEC will automatically update and supersede this information. We incorporate by reference the documents listed below, and all documents subsequently filed with the SEC pursuant to Section 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) prior to the termination of the offering under this prospectus:

Any statements contained in a previously filed document incorporated by reference into this prospectus is deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus, or in a subsequently filed document also incorporated by reference herein, modifies or supersedes that statement.

You may request a copy of these filings at no cost, by writing or telephoning us at: 950 West Maude Avenue, Sunnyvale, CA, 94085, Attention: Vice President of Investor Relations, (408) 617-7000. Information about us, including our SEC filings, is also available at our website at www.palm.com. However, the information on our website is not a part of this prospectus or any prospectus supplement that we file.

Certain matters discussed in this prospectus or incorporated by reference into this prospectus are “forward-looking statements.” The Private Securities Litigation Reform Act of 1995 has established that these statements qualify for safe harbors from liability. Forward-looking statements may include words like we “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “may,” “will,” “would,” our “strategy” and similar expressions and include, without limitation, statements regarding our intentions, expectations and beliefs concerning, among other things, the following: mobile products and the mobile product market; our leadership position in mobile products; our market share; our ability to grow our business; our revenue, cost of revenue, gross margins, operating income (loss), operating expenses, operating results and profitability; our corporate strategy; developing market-defining products; growth in the smartphone market; capitalizing on industry trends and dynamics; economic trends and market conditions; our platform strategy; increasing the adoption of smartphones; the benefits of advertising; the domestic and international market opportunity available to us; international, political and economic risk; our development and introduction of new products and services; acceptance of our smartphone products; market demand for our products; our ability to differentiate our products, deliver a range of product choices around open platforms and develop products to serve a broad range of customers and attract new customers; our ability to lead on design, ease-of-use and functionality; pricing and average selling prices for our products; the development and timing of our new operating system and related software and the introduction of products based on this new platform; competition and our competitive advantages; our ability to build our brand and consumers’ awareness of our products; the resources that we and our competitors devote to development, promotion and sale of products; our expectations regarding our product lines; our product mix; our ability to broaden and expand our wireless carrier relationships; revenue and credit concentration with our largest customers; collectability of customer accounts; our ability to cause application providers to provide applications for our products; royalty obligations; inventory, channel inventory levels and inventory valuation; price protection, rebates and returns; repair costs; product warranty accrual and liability; our effective tax rate and income tax expense (benefit); forecasted product and manufacturing requirements; seasonality in sales of our products; the adequacy of our properties, facilities and operating leases and our ability to secure additional space; our tax strategy; realization and recoverability of our net deferred tax assets; the need to increase our deferred tax asset valuation allowance; utilization of our net operating loss and tax credit carryforwards; our belief that our cash, cash equivalents and short-term investments will be sufficient to satisfy our anticipated cash requirements; our liquidity, cash flow, cash position and ability to obtain additional funding; impairment charges and recovery in market value in connection with our investments in auction rate securities; the liquidity of, holding periods for and our ability and intent to hold our auction rate securities; the completion of restructuring actions; compensation and other expense reductions; dividends; interest rates; the timing and amount of our cash generation and cash flows; declines in the handheld market and in our handheld business; our use of options, restricted stock and restricted stock units; unrecognized compensation cost under our stock plans; stock price volatility; option exercise behavior under our stock plans; vesting, terms and forfeiture of our equity awards; our stock-based compensation valuation models; our defenses to, and the effects and outcomes of, legal proceedings and litigation matters; provisions in our charter documents, Delaware law and a stockholders’ agreement and the potential effects of a stockholder rights plan; our relationship with Elevation Partners, L.P. (“Elevation Partners”); our debt obligations, the related interest expense for future periods and the effect of any non-compliance; and the potential impact of our critical accounting policies and changes in financial accounting standards or practices.

These forward-looking statements are subject to risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements. All forward-looking statements are qualified by the risks described in the documents incorporated by reference into this prospectus and any supplement to this prospectus. We have no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or risks. New information, future events or risks may cause the forward-looking events we discuss in this prospectus not to occur.

We intend to use the net proceeds from the sale of the securities for working capital and general corporate purposes including, but not limited to, funding our operations, purchasing capital equipment, funding potential acquisitions, repaying debt and repurchasing shares of our common stock. We may also invest the proceeds in certificates of deposit, U.S. government securities or certain other interest-bearing securities. If we decide to use the net proceeds from a particular offering of securities for a specific purpose, we will describe that in the related prospectus supplement.

Our ratio of earnings to fixed charges and preference dividends was as follows for the respective periods indicated:

For the purpose of calculating this ratio, earnings consist of our income (loss) before income taxes plus fixed charges. Fixed charges include interest on indebtedness, amortization of borrowing expenses and the portion of rental expense under operating leases deemed by us to be representative of the interest factor. Preference dividends represent the pre-tax accretion of Series B Redeemable Convertible Preferred Stock (the “Series B Preferred Stock”).

For the years ended June 3, 2005, June 2, 2006 and June 1, 2007, there is no difference between the ratio of earnings available to cover fixed charges and the ratio of earnings available to cover fixed charges and preference dividends. The deficiency of earnings available to cover fixed charges for the years ended May 28, 2004 and May 30, 2008 and for the three months ended August 29, 2008 was $4,124,000, $158,228,000 and $42,111,000, respectively. The deficiency of earnings available to cover fixed charges and preference dividends for the years ended May 28, 2004 and May 30, 2008 and for the three months ended August 29, 2008 was $4,124,000, $163,744,000 and $44,512,000, respectively.

The following description of our capital stock is based on our restated certificate of incorporation, as amended (the “Restated Certificate of Incorporation”), our bylaws, as amended (the “Bylaws”) and applicable provisions of law. We have summarized certain portions of the Restated Certificate of Incorporation and Bylaws below. The summary is not complete. The Restated Certificate of Incorporation and Bylaws that we have filed with the SEC and have been filed as exhibits to our Form 10-K for the year ended May 30, 2008 are incorporated by reference in this registration statement. You should read the Restated Certificate of Incorporation and Bylaws for the provisions that are important to you.

Certain provisions of the Delaware General Corporation Law (the “DGCL”), the Restated Certificate of Incorporation, the Bylaws and rights plan summarized in the following paragraphs may have an anti-takeover effect. This may delay, defer or prevent a tender offer or takeover attempt that a stockholder might consider in its best interests, including those attempts that might result in a premium over the market price for the shares held by such stockholder.

As of August 29, 2008, there were approximately 108,910,000 shares of common stock outstanding which were held of record by 3,389 stockholders. The holders of shares of our common stock, subject to the preferential rights of the holders of any shares of our preferred stock, are entitled to dividends when and as declared by our board of directors. The holders of our common stock have one vote per share on all matters submitted to a vote of the stockholders (other than certain matters that are only subject to approval by the holders of the Series B Preferred Stock), and the right to share pro rata in the net assets of Palm in liquidation after payment of any amounts due to creditors and in respect of any preferred stock. Holders of shares of our common stock are not entitled as a matter of right to any preemptive or subscription rights and are not entitled to cumulative voting for directors. All outstanding shares of common stock are, and the shares of common stock issued upon any conversion or exchange of any debt securities or preferred stock providing for such conversion or exchange will be, fully paid and nonassessable. Our common stock is listed on the Nasdaq Global Select Market. The transfer agent and registrar for our common stock is Computershare Trust Company, N.A. Computershare’s address is 250 Royall Street, Canton Massachusetts 02021, and its telephone number is (781) 575-2000.

We are authorized to issue 125,000,000 shares of preferred stock, $0.001 par value, in one or more series, with such designations and such relative voting, dividends, liquidation, conversion and other rights, preferences and limitations as are stated in the Restated Certificate of Incorporation. We have designated 2,000,000 shares of our preferred stock as Series A Participating Preferred Stock, none of which have been issued, in connection with the stockholders rights plan as described under “Rights Plan” below. We have designated 325,000 shares of our preferred stock as Series B Redeemable Convertible Preferred Stock, all of which have been issued, as described under “Preferred Stock—Series B Redeemable Convertible Preferred Stock” below. The authorized but unissued shares of preferred stock may be issued pursuant to resolution by our board of directors without the vote of

holders of our capital stock, subject to certain limitations imposed by law or our Bylaws. If a series of preferred stock is offered pursuant to this prospectus, we will describe the specific terms of such series of preferred stock, including rights, if any, with respect to voting, dividends and liquidation preference, the conversion rights, if any, and the restrictions, if any, on the repurchase or redemption of the preferred stock by us, in the prospectus supplement relating to that series. The description of preferred stock set forth in this prospectus and in any description of the terms of a particular series of preferred stock in the related prospectus supplement will contain only a summary of the terms of such series. You should refer to the applicable certificate of designation for such series of preferred stock for complete information with respect to such preferred stock. The prospectus supplement will also contain a description of certain U.S. federal income tax consequences relating to the preferred stock.

On October 24, 2007, Elevation Partners invested $325.0 million in Palm in exchange for 325,000 shares of Palm’s Series B Preferred Stock.

The holders of the Series B Preferred Stock have various rights and preferences as follows:

We are subject to Section 203 of the DGCL (“Section 203”). In general, Section 203 prohibits a publicly held Delaware corporation from engaging in various “business combination” transactions with any interested stockholder for a period of three years following the date of the transactions in which the person became an interested stockholder, unless:

The following description of our rights plan is based substantially on the Preferred Stock Rights Agreement dated as of September 25, 2000, between Palm and Computershare Trust Company, N.A., as successor to Equiserve Trust Company, N.A. and Fleet National Bank, as Rights Agent (the “Rights Agreement”), and the amendments to the Rights Agreement dated as of November 12, 2004, June 1, 2007 and October 24, 2007, respectively (the “Amendments to the Rights Agreement”). We have summarized certain portions of our rights plan. The summary is not complete. The Rights Agreement and Amendments to the Rights Agreement have been filed as exhibits to our Form 10-K for the year ended May 30, 2008 and are incorporated by reference into this prospectus. You should read the Rights Agreement and Amendments to the Rights Agreement for the provisions that are important to you. In the following description, we refer to our Rights Agreement and the Amendments to the Rights Agreement collectively as the “rights agreement.”

On September 21, 2000, our board of directors adopted a stockholder rights plan and declared a distribution of one preferred stock purchase right for each share of our common stock outstanding on November 6, 2000, and each share of common stock issued after that date. The rights are transferable with our common stock until they become exercisable but are not exercisable until the distribution date described in the plan. Generally, the plan distribution date will not occur until a person or group (an “Acquiring Person”) acquires or makes a tender offer for 15 percent or more of our outstanding common stock, including both shares of common stock outstanding and shares of common stock issuable upon conversion of the Series B Preferred Stock outstanding. The rights expire on November 6, 2010 unless we redeem them at an earlier date. The expiration date may be extended by our board. When a right becomes exercisable, its holder is entitled to purchase from us 1/1000th of a share of Series A Participating Preferred Stock at a purchase price of $110.00, subject to adjustment in certain circumstances since entry into the Rights Agreement.

If any person or group acquires 15 percent or more of our common stock, including both shares of common stock outstanding and shares of common stock issuable upon conversion of the Series B Preferred Stock outstanding, the rights holders, other than the Acquiring Person and its affiliates, will be entitled to receive upon exercise, that number of shares of common stock that at the time have a market value equal to twice the purchase price of the right.

Our board has the right to redeem the purchase rights in certain circumstances for $0.001 per share, subject to adjustment in certain circumstances since entry into the Rights Agreement. Until a right is exercised, rights holders have no rights as holders of our common stock, including the right to vote and to receive dividends. The rights agreement includes antidilution provisions designed to prevent efforts to diminish the effectiveness of the rights. The terms of the rights agreement may be amended in any respect without the consent of the rights holders on or prior to the plan distribution date; thereafter, the terms of the rights agreement may be amended without the consent of rights holders in order to cure any ambiguities or to make changes which do not adversely affect the interests of rights holders (other than any Acquiring Person and its affiliates).

In connection with the purchase of Series B Preferred Stock by Elevation Partners and certain of its affiliates (the “Elevation Parties”), we amended our rights plan in 2007 for the benefit of the Elevation Parties. In particular, the Elevation Parties may beneficially own more than 15% of our common shares outstanding without causing a triggering event under the rights plan, so long as their ownership percentage does not exceed a certain standstill limit. Moreover, if the Elevation Parties enter into any agreement, arrangement or understanding with a third party with respect to the permitted purchase or sale of any of our equity securities, then, for purposes of the rights agreement, (i) the Elevation Parties shall not be deemed to beneficially own any of our equity securities held by the third party (other than the securities that are the subject of the agreement or arrangement) and (ii) neither the third party nor any of its affiliates shall be deemed to beneficially own any of our equity securities held by the Elevation Parties (other than the securities that are the subject of the agreement or arrangement). Additionally, if any of our equity securities held by the Elevation Parties are subject to a permitted pledge or contractual encumbrance resulting from the incurrence of indebtedness from a bank or financial institution, then, for purposes of the rights agreement, (i) the Elevation Parties shall not be deemed to beneficially own any of our equity securities held by such bank or financial institution (other than the securities that are the subject of the pledge or encumbrance) and (ii) neither such bank or financial institution, nor any of its affiliates, shall be deemed to beneficially own any of our equity securities pledged by the Elevation Parties, except to the extent such securities are acquired by such bank or financial institution as a result of a foreclosure thereon.

This description of the rights agreement is qualified in its entirety by reference to the full text of the rights agreement.

Our debt securities, consisting of notes, debentures or other evidences of indebtedness, may be issued from time to time in one or more series pursuant to, in the case of senior debt securities, a senior indenture to be entered into between us and a trustee to be named therein, and in the case of subordinated debt securities, a subordinated indenture to be entered into between us and a trustee to be named therein. The terms of our debt securities will include those set forth in the indentures and those made a part of the indentures by the Trust Indenture Act of 1939.

Because the following is only a summary of selected provisions of the indentures and the debt securities, it does not contain all information that may be important to you. This summary is not complete and is qualified in its entirety by reference to the base indentures and any supplemental indentures thereto or officer’s certificate or board resolution related thereto. We urge you to read the indentures because the indentures, not this description, define the rights of the holders of the debt securities. The senior indenture and the subordinated indenture will be substantially in the forms included as exhibits to the registration statement of which this prospectus is a part.

As used in this section of the prospectus and under the captions “Description of Capital Stock,” “Description of Warrants” and “Description of Units,” the terms “we,” “us” and “our” refer only to Palm and not to any existing or future subsidiaries of Palm.

The senior debt securities will constitute unsecured and unsubordinated obligations of ours and will rank pari passu with our other unsecured and unsubordinated obligations. The subordinated debt securities will constitute our unsecured and subordinated obligations and will be junior in right of payment to our Senior Indebtedness (including senior debt securities), as described under the heading “Certain Terms of the Subordinated Debt Securities—Subordination.”

We conduct some of our operations through subsidiaries. Consequently, our ability to pay our obligations, including our obligation to pay principal or interest on the debt securities, to pay the debt securities at maturity or upon redemption or to buy the debt securities may depend on our subsidiaries repaying investments and advances we have made to them, and on our subsidiaries’ earnings and their distributing those earnings to us. The debt securities will be effectively subordinated to all obligations (including trade payables and preferred stock obligations) of our subsidiaries. Our subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due on the debt securities or to make funds available to us to do so. Our subsidiaries’ ability to pay dividends or make other payments or advances to us will depend on their operating results and will be subject to applicable laws and contractual restrictions. The indentures will not limit our subsidiaries’ ability to enter into other agreements that prohibit or restrict dividends or other payments or advances to us.

The debt securities will be our unsecured obligations. Our secured debt and other secured obligations will be effectively senior to the debt securities to the extent of the value of the assets securing such debt or other obligations.

You should look in the prospectus supplement for any additional or different terms of the debt securities being offered, including the following terms:

We may from time to time, without notice to or the consent of the holders of any series of debt securities, create and issue further debt securities of any such series ranking equally with the debt securities of such series in all respects (or in all respects other than the payment of interest accruing prior to the issue date of such further debt securities or except for the first payment of interest following the issue date of such further debt securities). Such further debt securities may be consolidated and form a single series with the debt securities of such series and have the same terms as to status, redemption or otherwise as the debt securities of such series.

You may present debt securities for exchange and you may present debt securities for transfer in the manner, at the places and subject to the restrictions set forth in the debt securities and the applicable prospectus supplement. We will provide you those services without charge, although you may have to pay any tax or other governmental charge payable in connection with any exchange or transfer, as set forth in the indenture.

Debt securities will bear interest at a fixed rate or a floating rate. Debt securities bearing no interest or interest at a rate that at the time of issuance is below the prevailing market rate (original issue discount securities) may be sold at a discount below their stated principal amount. Special U.S. federal income tax considerations applicable to any such discounted debt securities or to certain debt securities issued at par which are treated as

having been issued at a discount for U.S. federal income tax purposes will be described in the applicable prospectus supplement.

We may issue debt securities with the principal amount payable on any principal payment date, or the amount of interest payable on any interest payment date, to be determined by reference to one or more currency exchange rates, securities or baskets of securities, commodity prices or indices. You may receive a payment of principal on any principal payment date, or a payment of interest on any interest payment date, that is greater than or less than the amount of principal or interest otherwise payable on such dates, depending on the value on such dates of the applicable currency, security or basket of securities, commodity or index. Information as to the methods for determining the amount of principal or interest payable on any date, the currencies, securities or baskets of securities, commodities or indices to which the amount payable on such date is linked and certain additional tax considerations will be set forth in the applicable prospectus supplement.

Unless otherwise indicated in a prospectus supplement, the senior debt securities will not contain any financial or restrictive covenants, including covenants restricting either us or any of our subsidiaries from incurring, issuing, assuming or guarantying any indebtedness secured by a lien on any of our or our subsidiaries’ property or capital stock, or restricting either us or any of our subsidiaries from entering into sale and leaseback transactions.

Unless we indicate otherwise in a prospectus supplement, we may not consolidate with or merge into any other person, in a transaction in which we are not the surviving corporation, or convey, transfer or lease our properties and assets substantially as an entirety to any person, unless:

Unless otherwise indicated in a prospectus supplement with respect to a particular series of senior debt securities, the senior debt securities will not contain any provisions which may afford holders of the senior debt securities protection in the event we have a change in control or in the event of a highly leveraged transaction (whether or not such transaction results in a change in control).

An event of default for any series of senior debt securities is defined under the senior indenture as being:

The default by us under any other debt, including any other series of debt securities, is not a default under the senior indenture.

If an event of default other than an event of default specified in the last two bullet points above occurs with respect to a series of senior debt securities and is continuing under the senior indenture, then, and in each and every such case, either the trustee or the holders of not less than 25% in aggregate principal amount of such series then outstanding under the senior indenture (each such series voting as a separate class) by written notice to us and to the trustee, if such notice is given by the holders, may, and the trustee at the request of such holders shall, declare the principal amount of and accrued interest, if any, on such senior debt securities to be immediately due and payable.

If an event of default specified in the last two bullet points above occurs with respect to us and is continuing, either the trustee or the holders of not less than 25% in aggregate principal amount of the senior debt securities of all series then outstanding under the senior indenture (treated as one class) may, by written notice to us and to the trustee, if such notice is given by the holders, declare the entire principal amount of, and accrued interest, if any, on each series of senior debt securities then outstanding to be immediately due and payable.

Upon a declaration of acceleration, the principal amount of and accrued interest, if any, on such senior debt securities shall be immediately due and payable. Unless otherwise specified in the prospectus supplement relating to a series of senior debt securities originally issued at a discount, the amount due upon acceleration shall include only the original issue price of the senior debt securities, the amount of original issue discount accrued to the date of acceleration and accrued interest, if any.

Upon certain conditions, declarations of acceleration may be rescinded and annulled and past defaults may be waived by the holders of a majority in aggregate principal amount of all the senior debt securities of such series affected by the default, each series voting as a separate class (or, of all the senior debt securities, as the case may be, voting as a single class). Furthermore, subject to various provisions in the senior indenture, the holders of at least a majority in aggregate principal amount of a series of senior debt securities, by notice to the trustee, may waive an existing default or event of default with respect to such senior debt securities and its consequences, except a default in the payment of principal of or interest on such senior debt securities or in respect of a covenant or provision of the senior indenture which cannot be modified or amended without the consent of the holders of each such senior debt security. Upon any such waiver, such default shall cease to exist, and any event of default with respect to such senior debt securities shall be deemed to have been cured, for every purpose of the senior indenture; but no such waiver shall extend to any subsequent or other default or event of default or impair any right consequent thereto. For information as to the waiver of defaults, see “—Modification and Waiver.”

The holders of at least a majority in aggregate principal amount of a series of senior debt securities may direct the time, method and place of conducting any proceeding for any remedy available to the trustee or exercising any trust or power conferred on the trustee with respect to such senior debt securities. However, the trustee may refuse to follow any direction that conflicts with law or the senior indenture, that may involve the trustee in personal liability, or that the trustee determines in good faith may be unduly prejudicial to the rights of holders of such series of senior debt securities not joining in the giving of such direction and may take any other action it deems proper that is not inconsistent with any such direction received from holders of such series of senior debt securities. A holder may not pursue any remedy with respect to the senior indenture or any series of senior debt securities unless:

These limitations, however, do not apply to the right of any holder of a senior debt security to receive payment of the principal of or interest, if any, on such senior debt security, or to bring suit for the enforcement of any such payment, on or after the due date for the senior debt securities, which right shall not be impaired or affected without the consent of the holder.

The senior indenture requires certain of our officers to certify, on or before a fixed date in each year in which any senior debt security is outstanding, as to their knowledge of our compliance with all conditions and covenants under the senior indenture.

The senior indenture provides that, unless the terms of any series of senior debt securities provides otherwise, we may discharge our obligations with respect to a series of senior debt securities and the senior indenture with respect to such series of senior debt securities if:

With respect to the first and second bullet points, only our obligations to compensate and indemnify the trustee and our right to recover unclaimed money held by the trustee under the senior indenture shall survive. With respect to the third bullet point, certain rights and obligations under the senior indenture (such as our obligation to maintain an office or agency in respect of such senior debt securities, to have moneys held for payment in trust, to register the transfer or exchange of such senior debt securities, to deliver such senior debt securities for replacement or to be canceled, to compensate and indemnify the trustee and to appoint a successor trustee, and our right to recover unclaimed money held by the trustee) shall survive until such senior debt securities are no longer outstanding. Thereafter, only our obligations to compensate and indemnify the trustee and our right to recover unclaimed money held by the trustee shall survive.

Unless the terms of any series of senior debt securities provide otherwise, on the 121st day after the date of deposit of the trust funds with the trustee, we will be deemed to have paid and will be discharged from any and all obligations in respect of the series of senior debt securities provided for in the funds, and the provisions of the senior indenture will no longer be in effect with respect to such senior debt securities (“legal defeasance”); provided that the following conditions shall have been satisfied:

Subsequent to the legal defeasance above, certain rights and obligations under the senior indenture (such as our obligation to maintain an office or agency in respect of such senior debt securities, to have moneys held for payment in trust, to register the exchange of such senior debt securities, to deliver such senior debt securities for replacement or to be canceled, to compensate and indemnify the trustee and to appoint a successor trustee, and our right to recover unclaimed money held by the trustee) shall survive until such senior debt securities are no longer outstanding. After such senior debt securities are no longer outstanding, only our obligations to compensate and indemnify the trustee and our right to recover unclaimed money held by the trustee shall survive.

We and the trustee may amend or supplement the senior indenture or the senior debt securities without the consent of any holder:

Other amendments and modifications of the senior indenture or the senior debt securities issued may be made, and our compliance with any provision of the senior indenture with respect to any series of senior debt securities may be waived, with the consent of the holders of not less than a majority of the aggregate principal amount of the outstanding senior debt securities of all series affected by the amendment or modification (voting as one class); provided, however, that each affected holder must consent to any modification, amendment or waiver that:

It shall not be necessary for the consent of the holders under this section of the senior indenture to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this section of the senior indenture becomes effective, the trustee must give to the holders affected thereby certain notice briefly describing the amendment, supplement or waiver. We will mail supplemental indentures to holders upon request. Any failure by the trustee to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture or waiver.

The senior indenture provides that no recourse shall be had under or upon any obligation, covenant, or agreement of ours in the senior indenture or any supplemental indenture, or in any of the senior debt securities or because of the creation of any indebtedness represented thereby, against any incorporator, stockholder, officer or director of ours or of any successor person thereof under any law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise. Each holder, by accepting the senior debt securities, waives and releases all such liability.

The senior indenture provides that, except during the continuance of a default, the trustee will not be liable, except for the performance of such duties as are specifically set forth in the senior indenture. If an event of

default has occurred and is continuing, the trustee will exercise such rights and powers vested in it under the senior indenture and will use the same degree of care and skill in its exercise as a prudent person would exercise under the circumstances in the conduct of such person’s own affairs.

We may have normal banking relationships with the trustee under the senior indenture in the ordinary course of business.

All funds deposited with the trustee or any paying agent for the payment of principal, interest, premium or additional amounts in respect of the senior debt securities that remain unclaimed for two years after the maturity date of such senior debt securities will be repaid to us upon our request. Thereafter, any right of any noteholder to such funds shall be enforceable only against us, and the trustee and paying agents will have no liability therefor.

The senior indenture and the debt securities will be governed by, and construed in accordance with, the internal laws of the State of New York.

Other than the terms of the subordinated indenture and subordinated debt securities relating to subordination, or otherwise as described in the prospectus supplement relating to a particular series of subordinated debt securities, the terms of the subordinated indenture and subordinated debt securities are identical in all material respects to the terms of the senior indenture and senior debt securities. Additional or different subordination terms may be specified in the prospectus supplement applicable to a particular series.

The indebtedness evidenced by the subordinated debt securities is subordinate to the prior payment in full of all our Senior Indebtedness, as defined in the subordinated indenture. During the continuance beyond any applicable grace period of any default in the payment of principal, premium, interest or any other payment due on any of our Senior Indebtedness, we may not make any payment of principal of, or premium, if any, or interest on the subordinated debt securities. In addition, upon any payment or distribution of our assets upon any dissolution, winding up, liquidation or reorganization, the payment of the principal of, or premium, if any, and interest on the subordinated debt securities will be subordinated to the extent provided in the subordinated indenture in right of payment to the prior payment in full of all our Senior Indebtedness. Because of this subordination, if we dissolve or otherwise liquidate, holders of our subordinated debt securities may receive less, ratably, than holders of our Senior Indebtedness. The subordination provisions do not prevent the occurrence of an event of default under the subordinated indenture.

The term “Senior Indebtedness” of a person means with respect to such person the principal of, premium, if any, interest on, and any other payment due pursuant to any of the following, whether outstanding on the date of the subordinated indenture or incurred by that person in the future:

unless, in the case of any particular indebtedness, lease, renewal, extension or refunding, the instrument or lease creating or evidencing it or the assumption or guarantee relating to it expressly provides that such indebtedness, lease, renewal, extension or refunding is not superior in right of payment to the subordinated debt securities. Our senior debt securities constitute Senior Indebtedness for purposes of the subordinated debt indenture.

At our option, we may elect to offer fractional shares of preferred stock, rather than full shares of preferred stock. If we do elect to offer fractional shares of preferred stock, we will issue to the public receipts for depositary shares and each of these depositary shares will represent a fraction of a share of a particular series of preferred stock, as specified in the applicable prospectus supplement. Each owner of a depositary share will be entitled, in proportion to the applicable fractional interest in shares of preferred stock underlying that depositary share, to all rights and preferences of the preferred stock underlying that depositary share. These rights may include dividend, voting, redemption and liquidation rights.

The shares of preferred stock underlying the depositary shares will be deposited with a bank or trust company selected by us to act as depositary, under a deposit agreement between us, the depositary and the holders of the depositary receipts. The depositary will be the transfer agent, registrar and dividend disbursing agent for the depositary shares.

The depositary shares will be evidenced by depositary receipts issued pursuant to the depositary agreement. Holders of depositary receipts agree to be bound by the deposit agreement, which requires holders to take certain actions such as filing proof of residence and paying certain charges.

The summary of terms of the depositary shares contained in this prospectus is not complete. You should refer to the forms of the deposit agreement, our certificate of incorporation and the certificate of designation for the applicable series of preferred stock that are, or will be, filed with the SEC.

The depositary will distribute cash dividends or other cash distributions, if any, received in respect of the series of preferred stock underlying the depositary shares to the record holders of depositary receipts in proportion to the number of depositary shares owned by those holders on the relevant record date. The relevant record date for depositary shares will be the same date as the record date for the preferred stock.

In the event of a distribution other than in cash, the depositary will distribute property received by it to the record holders of depositary receipts that are entitled to receive the distribution, unless the depositary determines that it is not feasible to make the distribution. If this occurs, the depositary, with our approval, may adopt another method for the distribution, including selling the property and distributing the net proceeds to the holders.

If a series of preferred stock underlying the depositary shares has a liquidation preference, in the event of the voluntary or involuntary liquidation, dissolution or winding up of Palm, holders of depositary shares will be entitled to receive the fraction of the liquidation preference accorded each share of the applicable series of preferred stock, as set forth in the applicable prospectus supplement.

If a series of preferred stock underlying the depositary shares is subject to redemption, the depositary shares will be redeemed from the proceeds received by the depositary resulting from the redemption, in whole or in part, of the preferred stock held by the depositary. Whenever we redeem any preferred stock held by the depositary, the depositary will redeem, as of the same redemption date, the number of depositary shares representing the preferred stock so redeemed. The depositary will mail the notice of redemption to the record holders of the depositary receipts promptly upon receiving the notice from us and no fewer than 20 or more than 60 days, unless otherwise provided in the applicable prospectus supplement, prior to the date fixed for redemption of the preferred stock.

Upon receipt of notice of any meeting at which the holders of preferred stock are entitled to vote, the depositary will mail the information contained in the notice of meeting to the record holders of the depositary receipts underlying the preferred stock. Each record holder of those depositary receipts on the record date will be entitled to instruct the depositary as to the exercise of the voting rights pertaining to the amount of preferred stock underlying that holder’s depositary shares. The record date for the depositary will be the same date as the record date for the preferred stock. The depositary will try, as far as practicable, to vote the preferred stock underlying the depositary shares in accordance with these instructions. We will agree to take all action that may be deemed necessary by the depositary in order to enable the depositary to vote the preferred stock in accordance with these instructions. The depositary will not vote the preferred stock to the extent that it does not receive specific instructions from the holders of depositary receipts.

Owners of depositary shares will be entitled to receive upon surrender of depositary receipts at the principal office of the depositary and payment of any unpaid amount due to the depositary, the number of whole shares of preferred stock underlying their depositary shares.

Partial shares of preferred stock will not be issued. Holders of preferred stock will not be entitled to deposit the shares under the deposit agreement or to receive depositary receipts evidencing depositary shares for the preferred stock.

The form of depositary receipt evidencing the depositary shares and any provision of the deposit agreement may be amended by agreement between us and the depositary. However, any amendment which materially and adversely alters the rights of the holders of depositary shares, other than fee changes, will not be effective unless the amendment has been approved by at least a majority of the outstanding depositary shares. The deposit agreement may be terminated by the depositary or us only if:

We will pay all transfer and other taxes and governmental charges arising solely from the existence of the depositary arrangement. We will also pay charges of the depositary in connection with:

Holders of depositary receipts will pay transfer, income and other taxes and governmental charges and other specified charges as provided in the deposit agreement for their accounts. If these charges have not been paid, the depositary may:

The depositary will forward to the holders of depositary receipts all reports and communications we deliver to the depositary that we are required to furnish to the holders of the preferred stock. In addition, the depositary will make available for inspection by holders of depositary receipts at the principal office of the depositary, and at such other places as it may from time to time deem advisable, any reports and communications we deliver to the depositary as the holder of preferred stock.

Neither the depositary nor Palm will be liable if either the depositary or Palm is prevented or delayed by law or any circumstance beyond either the depositary or Palm’s control in performing their respective obligations under the deposit agreement. Palm’s obligations and the depositary’s obligations will be limited to the performance in good faith of Palm or the depositary’s respective duties under the deposit agreement. Neither the depositary nor Palm will be obligated to prosecute or defend any legal proceeding in respect of any depositary shares or preferred stock unless satisfactory indemnity is furnished. Palm and the depositary may rely on:

The depositary may resign at any time by delivering a notice to us. We may remove the depositary at any time. Any such resignation or removal will take effect upon the appointment of a successor depositary and its acceptance of such appointment. The successor depositary must be appointed within 60 days after delivery of the notice for resignation or removal. The successor depositary must be a bank and trust company having its principal office in the United States of America and having a combined capital and surplus of at least $150,000,000.

Owners of the depositary shares will be treated for federal income tax purposes as if they were owners of the preferred stock underlying the depositary shares. As a result, owners will be entitled to take into account for federal income tax purposes and deductions to which they would be entitled if they were holders of such preferred stock. No gain or loss will be recognized for federal income tax purposes upon the withdrawal of preferred stock in exchange for depositary shares. The tax basis of each share of preferred stock to an exchanging owner of depositary shares will, upon such exchange, be the same as the aggregate tax basis of the depositary shares exchanged. The holding period for preferred stock in the hands of an exchanging owner of depositary shares will include the period during which such person owned such depositary shares.

We may issue warrants to purchase our debt or equity securities or securities of third parties or other rights, including rights to receive payment in cash or securities based on the value, rate or price of one or more specified commodities, currencies, securities or indices, or any combination of the foregoing. Warrants may be issued independently or together with any other securities and may be attached to, or separate from, such securities. Each series of warrants will be issued under a separate warrant agreement to be entered into between us and a warrant agent. The terms of any warrants to be issued and a description of the material provisions of the applicable warrant agreement will be set forth in the applicable prospectus supplement.

As specified in the applicable prospectus supplement, we may issue units consisting of one or more warrants, debt securities, shares of preferred stock, shares of common stock or any combination of such securities.

Each debt security, warrant and unit will be represented either by a certificate issued in definitive form to a particular investor or by one or more global securities representing the entire issuance of securities. Certificated securities in definitive form and global securities will be issued in registered form. Definitive securities name you or your nominee as the owner of the security, and in order to transfer or exchange these securities or to receive payments other than interest or other interim payments, you or your nominee must physically deliver the securities to the trustee, registrar, paying agent or other agent, as applicable. Global securities name a depositary or its nominee as the owner of the debt securities, warrants or units represented by these global securities. The depositary maintains a computerized system that will reflect each investor’s beneficial ownership of the securities through an account maintained by the investor with its broker/dealer, bank, trust company or other representative, as we explain more fully below.

We may issue the registered debt securities, warrants and units in the form of one or more fully registered global securities that will be deposited with a depositary or its nominee identified in the applicable prospectus supplement and registered in the name of that depositary or nominee. In those cases, one or more registered global securities will be issued in a denomination or aggregate denominations equal to the portion of the aggregate principal or face amount of the securities to be represented by registered global securities. Unless and until it is exchanged in whole for securities in definitive registered form, a registered global security may not be transferred except as a whole by and among the depositary for the registered global security, the nominees of the depositary or any successors of the depositary or those nominees.

If not described below, any specific terms of the depositary arrangement with respect to any securities to be represented by a registered global security will be described in the prospectus supplement relating to those securities. We anticipate that the following provisions will apply to all depositary arrangements.

Ownership of beneficial interests in a registered global security will be limited to persons, called participants, that have accounts with the depositary or persons that may hold interests through participants. Upon the issuance of a registered global security, the depositary will credit, on its book-entry registration and transfer system, the participants’ accounts with the respective principal or face amounts of the securities beneficially owned by the participants. Any dealers, underwriters or agents participating in the distribution of the securities will designate the accounts to be credited. Ownership of beneficial interests in a registered global security will be shown on, and the transfer of ownership interests will be effected only through, records maintained by the depositary, with respect to interests of participants, and on the records of participants, with respect to interests of persons holding through participants. The laws of some states may require that some purchasers of securities take physical delivery of these securities in definitive form. These laws may impair your ability to own, transfer or pledge beneficial interests in registered global securities.

So long as the depositary, or its nominee, is the registered owner of a registered global security, that depositary or its nominee, as the case may be, will be considered the sole owner or holder of the securities represented by the registered global security for all purposes under the applicable indenture, warrant agreement or unit agreement. Except as described below, owners of beneficial interests in a registered global security will not be entitled to have the securities represented by the registered global security registered in their names, will

not receive or be entitled to receive physical delivery of the securities in definitive form and will not be considered the owners or holders of the securities under the applicable indenture, warrant agreement or unit agreement. Accordingly, each person owning a beneficial interest in a registered global security must rely on the procedures of the depositary for that registered global security and, if that person is not a participant, on the procedures of the participant through which the person owns its interest, to exercise any rights of a holder under the applicable indenture, warrant agreement or unit agreement. We understand that under existing industry practices, if we request any action of holders or if an owner of a beneficial interest in a registered global security desires to give or take any action that a holder is entitled to give or take under the applicable indenture, warrant agreement or unit agreement, the depositary for the registered global security would authorize the participants holding the relevant beneficial interests to give or take that action, and the participants would authorize beneficial owners owning through them to give or take that action or would otherwise act upon the instructions of beneficial owners holding through them.

Principal, premium, if any, and interest payments on debt securities, and any payments to holders with respect to warrants or units, represented by a registered global security registered in the name of a depositary or its nominee will be made to the depositary or its nominee, as the case may be, as the registered owner of the registered global security. None of Palm, the trustee, any warrant agent, unit agent or any other agent of Palm, agent of the trustee or agent of such warrant agent or unit agent will have any responsibility or liability for any aspect of the records relating to payments made on account of beneficial ownership interests in the registered global security or for maintaining, supervising or reviewing any records relating to those beneficial ownership interests.

We expect that the depositary for any of the securities represented by a registered global security, upon receipt of any payment of principal, premium, interest or other distribution of underlying securities or other property to holders of that registered global security, will immediately credit participants’ accounts in amounts proportionate to their respective beneficial interests in that registered global security as shown on the records of the depositary. We also expect that payments by participants to owners of beneficial interests in a registered global security held through participants will be governed by standing customer instructions and customary practices, as is now the case with the securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of those participants.

If the depositary for any of these securities represented by a registered global security is at any time unwilling or unable to continue as depositary or ceases to be a clearing agency registered under the Exchange Act, and a successor depositary registered as a clearing agency under the Exchange Act is not appointed by us within 90 days, we will issue securities in definitive form in exchange for the registered global security that had been held by the depositary. Any securities issued in definitive form in exchange for a registered global security will be registered in the name or names that the depositary gives to the relevant trustee, warrant agent, unit agent or other relevant agent of ours or theirs. It is expected that the depositary’s instructions will be based on directions received by the depositary from participants with respect to ownership of beneficial interests in the registered global security that had been held by the depositary.

We or selling security holders may sell the securities being offered hereby in the following manner or any manner specified in a prospectus supplement:

If any securities are sold pursuant to this prospectus by any persons other than us, we will, in a prospectus supplement, name the selling security holders, indicate the nature of any relationship such holders have had with us or any of our affiliates during the three years preceding such offering, state the amount of securities of the class owned by such security holder prior to the offering and the amount to be offered for the security holder’s account, and state the amount and (if one percent or more) the percentage of the class to be owned by such security holder after completion of the offering.

We or any selling security holder may directly solicit offers to purchase securities, or agents may be designated to solicit such offers. We will, in the prospectus supplement relating to such offering, name any agent that could be viewed as an underwriter under the Securities Act of 1933, as amended (the “Securities Act”) and describe any commissions that we or any selling security holder must pay. Any such agent will be acting on a best efforts basis for the period of its appointment or, if indicated in the applicable prospectus supplement, on a firm commitment basis. Agents, dealers and underwriters may be customers of, engage in transactions with, or perform services for us or any selling security holder in the ordinary course of business.

If any underwriters or agents are utilized in the sale of the securities in respect of which this prospectus is delivered, we and, if applicable, any selling security holder will enter into an underwriting agreement or other agreement with them at the time of sale to them, and we will set forth in the prospectus supplement relating to such offering the names of the underwriters or agents and the terms of the related agreement with them.

If a dealer is utilized in the sale of the securities in respect of which the prospectus is delivered, we will sell such securities to the dealer, as principal. The dealer may then resell such securities to the public at varying prices to be determined by such dealer at the time of resale.

Remarketing firms, agents, underwriters and dealers may be entitled under agreements which they may enter into with us to indemnification by us and by any selling security holder against certain civil liabilities, including liabilities under the Securities Act, and may be customers of, engage in transactions with or perform services for us or any selling security holder in the ordinary course of business.

In order to facilitate the offering of the securities, any underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the securities or any other securities the prices of which may be used to determine payments on such securities. Specifically, any underwriters may overallot in connection with the offering, creating a short position for their own accounts. In addition, to cover overallotments or to stabilize the price of the securities or of any such other securities, the underwriters may bid for, and purchase, the securities or any such other securities in the open market. Finally, in any offering of the securities through a syndicate of underwriters, the underwriting syndicate may reclaim selling concessions allowed to an underwriter or a dealer for distributing the securities in the offering if the syndicate repurchases previously distributed securities in transactions to cover syndicate short positions, in stabilization transactions or otherwise. Any of these activities may stabilize or maintain the market price of the securities above independent market levels. Any such underwriters are not required to engage in these activities and may end any of these activities at any time.

Any underwriter, agent or dealer utilized in the initial offering of securities will not confirm sales to accounts over which it exercises discretionary authority without the prior specific written approval of its customer.

The validity of the securities in respect of which this prospectus is being delivered will be passed on for us by Davis Polk & Wardwell.

The consolidated financial statements and the related financial statement schedule, incorporated in this Prospectus by reference from the Company’s Annual Report on Form 10-K, and the effectiveness of the Company’s internal control over financial reporting have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports (which report relating to the consolidated financial statements and financial statement schedule expresses an unqualified opinion and includes an explanatory paragraph relating to the Company’s adoption of Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an Interpretation of FASB No. 109, and adoption of Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, which are incorporated herein by reference. Such consolidated financial statements and financial statement schedule have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.



Title of Each Class of Securities to be Registered	Amount to be Registered	Maximum Offering Price Per Unit	Maximum Aggregate Offering Price	Amount of Registration Fee (1)
Common Stock, $0.001 par value (2)	23,000,000	$16.25	$373,750,000	$20,855.25


	Per Share		Total
Public Offering Price	$	16.25	$	325,000,000
Underwriting Discounts and Commissions(1)	$	0.65	$	11,520,000
Proceeds to us, before expenses(1)	$	15.60	$	313,480,000


		Page
About this Prospectus Supplement		S-1
Caution Concerning Forward-Looking Statements		S-2
Prospectus Supplement Summary		S-4
Risk Factors		S-8
Use of Proceeds		S-36
Price Range of Common Stock and Dividends		S-37
Capitalization		S-38
Description of Capital Stock		S-40
Material U.S. Federal Tax Considerations for Non-U.S. Holders of Common Stock		S-47
Underwriting		S-49
Legal Matters		S-52
Experts		S-52
Where You Can Find More Information		S-52


	Common Stock Price
	High		Low
Fiscal Year 2008
First Quarter	$	18.08	$	13.86
Second Quarter		19.18		6.51
Third Quarter		6.89		4.49
Fourth Quarter		6.24		4.55

Fiscal Year 2009
First Quarter		8.51		5.18
Second Quarter		8.49		1.76
Third Quarter		8.98		1.42
Fourth Quarter		12.19		6.02

Fiscal Year 2010
First Quarter		16.58		11.99
Second Quarter (through September 22, 2009)		17.07		13.33


	August 28, 2009
(in thousands, except par value)	Actual			As Adjusted
Cash, cash equivalents and short-term investments	$	211,782		$	524,922	(1)

Current and long-term debt:(2)		393,000			393,000


Series B Preferred Stock, $0.001 par value, 325 shares authorized, 325 shares issued and outstanding actual and as adjusted(3)		267,905			267,905

Series C Preferred Stock, $0.001 par value, 100 shares authorized, 51 shares issued and outstanding actual and as adjusted(3)		16,876			16,876

Stockholders’ deficit:

Common Stock, $0.001 par value, 2,000,000 shares authorized, 142,329 shares issued and outstanding actual, 162,329 shares issued and outstanding as adjusted(4)		142			162
Additional paid-in capital		861,986			1,175,106
Accumulated deficit		(1,602,831	)		(1,602,831	)
Accumulated other comprehensive loss		1,755			1,755

Total stockholders’ deficit		(738,948	)		(425,808	)

Total capitalization	$	(61,167	)	$	251,973


		Page
Summary		3
Where You Can Find More Information		4
Caution Concerning Forward-Looking Statements		5
Use of Proceeds		6
Ratios of Earnings to Fixed Charges and Preference Dividends		6
Description of Capital Stock		7
Description of Debt Securities		12
Description of the Depositary Shares		22
Description of Warrants		24
Description of Units		25
Forms of Securities		25
Plan of Distribution		27
Validity of Securities		28
Experts		28


Name		Number of Shares
Goldman, Sachs & Co.		9,000,000
J.P. Morgan Securities Inc.		9,000,000
RBC Capital Markets Corporation		2,000,000

Total		20,000,000


	No Exercise		Full Exercise
Per share(1)	$	0.65	$	0.65
Total(1)	$	11,520,000	$	13,470,000


• Common stock		• Depositary shares
• Preferred stock		• Warrants
• Debt securities		• Units


• Maturity	• Redemption terms	• Liquidation amount
• Interest rate	• Listing on a security exchange	• Subsidiary guarantees
• Currency of payments	• Amount payable at maturity	• Sinking fund terms
• Dividends	• Conversion or exchange rights


For the Fiscal Years Ended					Three Months Ended August 29, 2008
May 30, 2008	June 1, 2007	June 2, 2006	June 3, 2005	May 28, 2004	Three Months Ended August 29, 2008
Ratio of earnings to fixed charges and preference dividends:
—	25.84x	25.57x	25.52x	—	—


Goldman, Sachs & Co.		J.P. Morgan