Jiping Wang will continue as CEO of the acquired company and will report to David Nagel, PalmSource president and CEO. In addition, Madeline Duva, CEO of China MobileSoft, joins PalmSource as vice president, silicon and ODM partners, and John Ostrem, founder, chairman and CTO of China MobileSoft, joins PalmSource as lead scientist.

PalmSource acquired CMS as part of its strategy to further extend the Company's leadership as a software provider for phones and mobile devices worldwide. The combination of Palm OS and CMS's software products is expected to enable PalmSource to provide one of the broadest lines of mobile software in the industry, powering mobile phones at all price points in all regions of the world. Over time, PalmSource expects to leverage the work CMS has done with Linux to provide a new version of Palm OS based on Linux. The Company will continue to support the Palm OS(R) Garnet and Palm OS(R) Cobalt operating system software lines.

"This acquisition of China MobileSoft is part of our strategy to expand our focus and provide software to a much wider phone and mobile device market than we have addressed previously," said David Nagel, president and CEO of PalmSource, Inc. "This is the next stage in our growth and a major milestone for the mobile phone industry. We plan to offer the ease-of-use and flexibility that Palm OS(R) is known for to all mobile phones and devices."

Financial Terms

PalmSource issued approximately 1,570,000 shares of PalmSource common stock in exchange for the outstanding equity and rights to acquire equity in CMS for a total purchase price of approximately $16 million. In connection with the acquisition, PalmSource's compensation committee approved the issuance of restricted stock, with a two year vesting schedule, and stock options, with a four year vesting schedule and exercisable at fair market value, totaling 219,966 shares to a total of 141 employees and consultants as part of the incentive plan to retain their services following the acquisition.

About PalmSource

PalmSource, Inc. is the company behind Palm OS, a leading operating system powering mobile information devices. Approximately 37 million Palm Powered handhelds and smartphones have been sold to date worldwide. Industry leaders Aceeca, AlphaSmart, Fossil, Garmin, GSL, Kyocera, Lenovo, palmOne, QTech, Samsung, Sony, Symbol Technologies and Tapwave license Palm OS to create diverse mobile devices that meet unique customer needs. Palm OS has given rise to a large community of users, enterprises, developers and manufacturers, who together make up the Palm Powered Economy. More information about PalmSource is available at http://www.palmsource.com/ http://www.palmsource.co.uk/ http://www.palmsource.fr/ http://www.palmsource.de/ http://www.palmsource.com/es http://www.palmsource.com.cn/ , , , , and .

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: This press release contains forward-looking statements that involve risks and uncertainties, as well as assumptions that if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Such forward-looking statements include, without limitation, statements regarding our strategy, markets, products, and product roadmap, the market for mobile devices and phones, including smartphone and Linux software. The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include, without limitation, our ability to successfully integrate the acquisition of China MobileSoft; our ability to successfully execute our strategy; our ability to identify and meet end users, operators/carriers and manufacturers requirements; realization of the anticipated growth in the mobile device market, particularly in China, and our ability to benefit from such growth and to do business successfully in China; our ability to deliver new products on schedule and in time to meet market demands, which products are easier to use and that enable operators/carriers, manufacturers and developers to bring products to market faster; our ability to successfully build a future version of Palm OS on Linux and to achieve acceleration in Palm OS(R) innovation and the anticipated critical mass worldwide; our ability to maintain and grow our application developer community and to gain acceptance by the Linux Open Source community; and other risks and uncertainties contained in our public announcements, reports to stockholders and other documents filed with and furnished to the Securities and Exchange Commission, including our Annual Report on Form 10-K for the period ended May 28, 2004 and our Quarterly Reports on Form 10-Q for the periods ended August 27, 2004 and November 26, 2004. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements.

NOTE: PalmSource and Palm OS are trademarks or registered trademarks of PalmSource, Inc. or its affiliate in the United States, France, Germany, Japan, the United Kingdom, and other countries. These marks may not be used in connection with any product or service that does not belong to PalmSource, Inc. (except as expressly permitted by a license with PalmSource, Inc.), in any manner that is likely to cause confusion among customers, or in any manner that disparages or discredits PalmSource, Inc., its licensor, its subsidiaries or affiliates. All other brands, product names, company names, trademarks and service marks are the properties of their respective owners. All rights reserved.

CONTACT: Maureen O'Connell, +1-408-400-1543, or maureen.oconnell@palmsource.com, or Brian Siegel, +1-408-400-1942, or, both of PalmSource, Inc.

Web site: http://www.palmsource.com/

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