PalmSource has shifted its engineering efforts to focus on development of Linux-based versions of its Palm OS software for mobile phones.

"We are delaying all development of products not directly related to this," said Patrick McVeigh, interim chief executive at PalmSource, during a teleconference to review the past quarter's financial results.

A version of the software for low-end or feature phones is scheduled for summer next year, said McVeigh. A high-end version of the software for smartphones is scheduled for the second half of next year.

In addition to the Linux operating system, McVeigh said that PalmSource will keep developing proprietary software where he sees a market.

PalmSource develops the Palm OS software for mobile devices such as the Treo smartphone and Tungsten PDA, both made by PalmOne.

Although the software was initially found mostly on handheld computers, the company has since shifted its focus entirely to the mobile phone market.

PalmSource acquired China Mobilesoft last year, a developer of software for mobile phones that includes Linux.

PalmSource has been struggling to sign up licensees for its software, but McVeigh said in the conference call that the company recently signed a deal with a "tier one handset manufacturer" and will soon release the name.

Income in PalmSource's most recent quarter was boosted by the $26.7m sale of the rights to the Palm brand to PalmOne last month. The company reported a net profit of $18.3m in the quarter ending 31 May and $17.3m in revenue.

Corrected for the sale of the naming rights and one time charges including a restructuring, PalmSource lost $700,000.

The vendor will reduce its US headcount by 16 per cent as part of the restructuring. Job cuts will be focused among middle and senior managers.