Carl Yankowski has resigned as chief executive officer (CEO) of Palm Inc. Eric Benhamou, the company's chairman, will take over until a replacement is found, the company said Thursday. Palm also announced that it has reached the last steps in an internal separation into two businesses.

Palm has been battered by the slow economy over the course of the year, which led to mounting inventories that have hurt the company financially. In addition, while its devices remain popular among consumers, Palm may not have nurtured the kind of applications and features that would have allowed it to boost its appeal in more profitable business markets, analysts said.

"Palm did very well with consumers, but they let the business side go soft," said Martin Reynolds, an analyst with Gartner Inc. "Yankowski had a consumer focus, so this puts Palm back on the footing to chase business users again."

Business refocus The appointment of a new chairman could help the company refocus on the enterprise, which could mean new applications, services and technologies geared towards business users. Microsoft and its key Pocket PC partners, including Compaq, have received positive reviews from enterprise customers and taken some of the limelight from Palm in this area.

Palm is made up of two business groups: a Solutions Group, which designs the Palm handheld line, and the Platform Solutions Group, which develops the Palm operating system and licenses it to other vendors. As part of the reorganization plan, by year's end the Platform Solutions Group is expected to be an internal Palm subsidiary, operating independently.

The split into two groups has changed Yankowski's role and "no longer matches my aspirations," he said in the statement. Yankowski did not offer his future plans.

Tumultuous year An executive council will oversee the company, with Benhamou leading that group, until a new CEO is named, Palm said. Other council members are David Nagel, Platform Solutions Group CEO, Todd Bradley, company executive vice president and chief operating officer of the Solutions Group, and Judy Bruner, Palm senior vice president and chief financial officer.

Palm's tumultuous year may have forced Yankowski to reflect on his role at the company and where he planned to take it, said Kevin Burden, an analyst with International Data Corp. (IDC)

"I think it's somewhat of a recognition that Palm probably wasn't moving in the right direction in the past year," Burden said. "It might have been a revelation on (Yankowski's) side to see that he is not the person to take Palm in the direction it needs to be going."

"Palm has almost looked as though it was standing still over the past year," he added.