Press Release

PalmSource Reports Third Quarter of Fiscal Year 2005 Consolidated Results

SUNNYVALE, Calif., Mar. 31, 2005 — PalmSource Inc., (NASDAQ: PSRC) provider of Palm OS®, a leading operating system powering next generation phones and mobile devices, today announced consolidated results for its third fiscal quarter ended February 25, 2005. Consolidated results for the quarter included one month of financial results for China MobileSoft Ltd. (CMS), which was acquired on January 28, 2005.

Consolidated revenue for the third quarter of 2005 was $17.2 million as compared to $21.6 million reported in the year ago quarter. Gross margin was 93 percent and was flat when compared to the year ago quarter. GAAP net loss was ($0.7) million, or ($0.05) per share, as compared to GAAP net income of $0.6 million or $0.05 per share reported in the year ago quarter.

Non–GAAP net income for the quarter was $0.6 million, or $0.04 per share as compared to non–GAAP net income of $3.6 million or $0.32 per share in the year ago quarter. Non–GAAP net income for the third quarter of 2005 excluded $1.4 million for stock–based compensation expense and $0.1 million for amortization of purchased intangible assets, which was partially offset by $0.1 million for the reversal of accrued restructuring charges. GAAP net loss per share for the third quarter of 2005 was calculated using basic shares outstanding of 15.0 million, while non–GAAP net earnings per share was calculated on a diluted basis using 15.3 million shares.

PalmSource licensees reported shipping a total of approximately 1.4 million units, of which 23 percent were smartphones and 77 percent were PDA's and other mobile handheld devices. This compares to a total of approximately 2.0 million units shipped in the third quarter of fiscal 2004, of which 12 percent were smartphones and 88 percent were PDA's and other mobile handheld devices. Also during the third quarter of 2005, as reported by its licensees, CMS applications were shipped on approximately 1 million feature and voice phones into the Chinese market.

"We continue to make progress in our plan to transform PalmSource into a broad–based software provider for all mobile devices," said David Nagel, president and CEO of PalmSource. "With the completion of the China MobileSoft acquisition, we now have a foothold in the Chinese market with our voice, feature and smartphone products, a low cost, localized development and support capability, and the technology base to improve the competitiveness of our software products internationally."

Business Outlook
For the fourth quarter ending June 3, 2005, the Company expects revenue in the range of $17.2 million to $18.0 million with a GAAP loss per share in the range of ($0.13) to ($0.18). Fourth quarter GAAP EPS includes approximately $0.13 per share for stock–based compensation and $0.01 per share for amortization of purchased intangible assets that should be excluded when calculating non–GAAP EPS. GAAP and Non–GAAP loss per share should be calculated using 15.0 million basic shares outstanding.

Investor Conference Call / Webcast Details
The Company will hold a conference call on Thursday, March 31, 2005 at 2:00 p.m. PST to review its third quarter results. It will be broadcast live and archived on the web at www.palmsource.com/about/ir.html. A replay of the call will be available for 7 days beginning at 3:00 p.m., PST. The replay number is (800) 642–1687, and the passcode is 4786093.

About PalmSource
PalmSource, Inc., the company behind Palm OS®, a leading operating system powering smart mobile devices, is a leading developer of software for mobile phones and other mobile devices. Its products include a wide range of software for mobile phones at all price points. More than 38 million mobile phones, handhelds, and other mobile devices run PalmSource software. More than 45 companies worldwide have licenses to PalmSource software, including Fossil, Garmin, GSPDA, Kyocera, Lenovo, palmOne, Samsung, Sony, Symbol Technologies. 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 www.palmsource.com, www.palmsource.co.uk, www.palmsource.fr, www.palmsource.de, www.palmsource.com/es and www.palmsource.com.cn.

Copyright © 2005, PalmSource, Inc. PalmSource, Palm OS, Palm Powered, and certain other trademarks and logos appearing on this press release 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 and trademarks used herein are or may be trademarks of, and are used to identify other products or services of, their respective owners. All rights reserved.

Use of Non–GAAP Financial Measures
Non–GAAP financial measures are not prepared in accordance with generally accepted accounting principles and may be different from non–GAAP financial measures used by other companies. Non–GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. The company's management refers to these non–GAAP financial measures –– such as non–GAAP net income and net loss –– in making operating decisions because they provide meaningful supplemental information regarding the company's operational performance, including the company's ability to provide cash flows to invest in research and development and fund acquisitions and capital expenditures. Non–GAAP net income and net loss exclude the effects of stock–based compensation, restructuring charges, separation costs from Palm, Inc., gain on early extinguishment of debt and amortization of intangibles that are included in GAAP financial measures. In addition, these non–GAAP financial measures facilitate management's internal comparisons to the company's historical operating results and comparisons to competitors' operating results. We include these non–GAAP financial measures in our earnings announcement because we believe they are useful to investors in allowing for greater transparency to supplemental information used by management in its financial and operational decision–making. Investors are encouraged to review the reconciliation of the non–GAAP financial measures used in this news release to their most directly comparable GAAP financial measure as provided with the financial statements attached to this news release.

Safe Harbor Statement
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 and products and financial results. 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 Ltd.; our ability to successfully execute our strategy; our ability to effectively utilize our technology to improve the competitiveness of our software products; 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 and the ability of our licensees and developers to deliver new products on schedule and in time to meet market demands; 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 Report 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.