PalmSource Soars on Its First Day

The OS spinoff gains more than 30%, while its hardware sibling loses.
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Shares of

PalmSource,

(PSRC)

the software spinoff of Palm, rocketed upward their first day of trading, while

palmOne,

(PLMO)

the merged offspring of handheld device makers Palm and Handspring, lost ground.

On a day of volatile trading, PalmSource finished up an impressive $11, or 38.6%, to $39.50. PalmOne lost 74 cents, or 4.1%, to $17.50.

The slide in palmOne isn't a huge surprise, given

widespread concern about the outlook for growth in the combined company's core PDA market, as well as its slow start in smart phones.

But the high demand for PalmSource shares comes as more of a surprise, given

increasing competition from

Microsoft

(MSFT) - Get Report

.

"It's definitely surprising to see the percentage terms in which it went up," says Gabriel Erdi, a trader and analyst for the

Marketocracy Technology Plus

fund. "I think it's indicative of the fact that the market's more enthralled with the software side of things. It also shows people are more concerned about the PDA market going forward, the fact that one went up and the other went down. In the long run I think PalmSource has better prospects than the other company."

On Tuesday, investors approved the spinoff of Palm's software arm, which markets the Palm OS used in Palm's own gadgets as well as those from

Kyocera

(KYO)

,

Samsung

and

Sony

(SNE) - Get Report

.

Shareholders also approved a merger between palmOne and Handspring at the Tuesday meeting.