PalmOne is to change its name back to Palm later this year and start selling its handheld computers and mobile phones under the Palm brand name.
PalmOne and PalmSource have jointly owned the Palm brand after the two companies split in 2003.
But the agreement caused confusion with end users and potential partners, PalmOne chief executive Ed Colligan said at the PalmSource Mobile Summit and DevCon in San Jose.
PalmSource has the right to the Palm name for the next four years, during which time the company will undergo a name change.
"People associate Palm with hardware," Colligan said at the developer event. "Palm means mobile computing. Palm will not mean Palm OS down the road."
PalmOne agreed to pay PalmSource $30m for the exclusive right to use the Palm name.
The hardware manufacturer also renewed its licence for the Palm OS operating system through to 2009 for a minimum royalty payment of $148.5m.
The name change will help PalmSource sell its software to device manufacturers, according to the company's interim chief executive Patrick McVeigh.
The old name is confusing for hardware manufacturers that consider using the Palm OS software on their devices because the name suggests close ties between the hardware and the software company.
Colligan acknowledged that a name change of the company and software could lead to confusion with end users. "But in the long run, if we want to build our company, we have to build our brand unencumbered," he said.
The agreement also enables PalmOne to start making devices that use software other than Palm OS.
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