Palm E-book Founders Out After Acquisition

The sale in early September of Palm Digital Media, the e-book retail Web site of the maker of Palm handheld devices, to PalmGear, a company that sells other Palm OS applications, has led to the departure of PDM's founding managers and spurred concern that the new owner is arbitrarily removing or concealing titles that deal with sex or are aimed at gay and lesbian readers.

Before being acquired by Palm in 2001, PDM was known as Peanut Press and specialized in selling trade e-books in a digital format that would run on the Palm OS. But the acquisition of the firm by the Franklin, Tenn.—based PalmGear has spurred the departure of Jeff Strobel, the founder and director; technical director David Pasco; and Mike Segroves, former director of business development.

With millions of devices using the Palm OS, the Palm e-book format is leading all other formats in e-book sales. Segroves told PW that he and the rest of PDM's management were looking forward to the acquisition of PDM by a company more experienced in online retail. "We are a retail site," said Segroves, "and we never quite fit the Palm business model." However, Segroves said, after the deal was signed it became apparent he would have to leave. "There was a big difference in their philosophy of how to run the business. We differed on everything from decisions about titles to marketing."

Previous PDM owners (netLibrary and Palm), Segroves said, "stayed out and let us run the company." Segroves explained, "I'm used to being the top dog and I didn't react well to the change. It was time for us to move on."

Since the acquisition, there have been reports of complaints that certain erotic titles have been removed from the PDM database or that their categories were removed, making them harder to find.

One publisher who supplies titles to PDM told PW that his company's titles had not been affected, but he suggested that PalmGear is simply inexperienced in dealing with "sensitive editorial material" or dealing with trade book publishers. "No one is happy about the arbitrary removal of material," he said, "but they are new to the industry and we need to be patient. We think it will all be worked out in the future."

Dave Bartels, a spokesperson for PalmGear, said the company was conferring with publishers and would not comment until that process was complete. "All the rumors regarding the acquisition will be addressed at that time." He estimated it might be two weeks before the company makes a public statement.