Palm Inc.'s operating-system business is set for some changes, as executive Alan Kessler leaves and a band of Be Inc. engineers prepare to arrive. Palm--which by some measures supplies the system software for 75% of handheld computers--has been slumping financially of late as it transitions to new products and contends with competitor Microsoft. Kessler, Palm's chief operating officer for platform products, appears to have taken the fall. The former 3Com exec plans to leave Palm Aug. 17.

Palm also says it's buying the engineering staff and technology of Be--a software company founded by former Apple Computer exec Jean-Louis Gassee in 1990--for $11 million in stock. Be has been through several incarnations, most notably as the developer of an alternative PC operating system, BeOS, and as a supplier of software for TV-top boxes. But Palm wants Be's BeIA software for handheld computers, which provides instant-on capabilities and TCP/IP software. Be, which claims Intel as its largest investor, plans to liquidate its assets after the transaction closes. Palm says Gassee will stay on temporarily as an advisor.