Elevation Partners sinks another $100 million into beleaguered Palm

Palm, Inc. today announced that Elevation Partners has agreed to make an additional $100 million equity investment in Palm. Under a definitive agreement reached today, Elevation will increase its investment in Palm by acquiring newly issued Series C preferred stock that is convertible into Palm common stock at a price of $3.25 per share, a 31 percent premium to the closing price of Palm common stock on Dec. 19, 2008. The Series C preferred stock carries a 0% dividend rate. Elevation will also receive warrants to acquire 7 million shares of Palm common stock at the same price. Prior to March 31, 2009, Palm may elect to cause Elevation to sell up to $49 million of this new investment to other investors on the same or better terms than on which Elevation invested.

“The additional capital from Elevation Partners will enable us to put added momentum behind the new product introductions scheduled for 2009 and will provide us with enhanced stability in unsettled economic times,” said Ed Colligan, president and chief executive officer of Palm, Inc., in the press release “Elevation has been a great partner to Palm, and we appreciate their continued confidence and support.”

MacDailyNews Note: “We’ve learned and struggled for a few years here figuring out how to make a decent phone. PC guys are not going to just figure this out. They’re not going to just walk in.” – Ed Colligan, Palm CEO, November 16, 2006, laughing off the idea that Apple succeed in the smartphone market.

In the press release, Roger McNamee, co-founder of Elevation Partners, stated, “We believe that Palm is in a position to transform the cell phone industry, and we are pleased to have the opportunity to make this additional investment in the company. Palm has an industry-leading team and an exciting, differentiated product roadmap. We are proud to be associated with the company and look forward to great things from Palm in 2009 and beyond.”

MacDailyNews Take: Roger must also believe in the tooth fairy.

The transaction is expected to close by Jan. 31, 2009, subject to customary closing conditions.

Elevation Partners is a private equity firm that makes investments in media, entertainment, and consumer-related businesses. Elevation’s five partners are Fred Anderson, former EVP and CFO of Apple; Bret Pearlman, former senior managing director of The Blackstone Group; Marc Bodnick, a founding principal of Silver Lake Partners; Roger McNamee, co-founder of Silver Lake Partners and Integral Capital Partners; and Bono, lead singer and co-founder of the rock band U2.

10 Comments

  1. All I know is that John Rubinstein is no dummy; nor are the dozens of high-level hardware engineering managers that he brought to Palm with him (well, a year after he left, when his employment contract’s prohibition on poaching expired). They must be doing something interesting. Whether it will be as interesting as Android, let alone iPhone, is another question, but I’ll still bet it will be something much more compelling than Treo.

    Although… Apple has shown us that developing a great new device is only partly a hardware problem. Did Palm hire great software designers, engineering managers, and engineers? If not, and if they’re planning on using their current team, this will be yet another flop, landing Palms down in the mud.

  2. Yes, Palm is preparing to transform the cell phone industry by removing itself from the playing field as an independent company. They are totally lining themselves up to try to get bought out by a larger competitor. They need way more than $100mil to launch new phones with their brand new operating system that has been in development for what, 10 years now.

  3. First, wasn’t Jon Rubinstein a hardware guy for Apple? And, aren’t they betting the farm on a SOFTWARE silver bullet, called Nova, built on Linux? Seems like they hired the wrong guy. Shouldn’t they have tried to get Scott Forstall or Bertrand Serlet, Apple’s software guys? Wasn’t it Scott and Bertrand who lobbied for OS X on the iPhone and not Linux?

    No matter how good Nova is, this will be their first shot at a desktop-class OS, right? And, how are they going to attract the attention of developers? There’s OS X where Apple already has 16M+ devices in service. There’s Android with maybe 500k devices and another device coming to market. There’s WinMo7 which MS is working on. There’s Blackberry OS. There’s Symbian. All of them have deeper pockets to attract developers.

    Palm has a mountain to climb, and if they succeed, it would be one of the greatest turnarounds ever.

  4. I agree KenC, Palm is definitely slow to the table. They had such an advantage with the Treo and they let it go to waste. If they had placed a new OS on the machine it would have been difficult for Apple to bring the iPhone to market. But they took a handheld OS and added telephony to it and created a mess.

    So where is Palm 6.0? Never released! Now, after what 6+ years, they are finally creating a beta or version 1 of Nova?

    Unless their Linux unit ties into the MacOS and Windows OS smoothly, this will spell the death bell for them. This is a company that failed to listen to its consumers. They thought that they and only they knew what was best. They were wrong! And Apple has made them pay for it.

    I’ve left the Palm world and I never thought that I would be so happy to do so. It is really nice to see people actually responding to questions and quick responses to problems. I complained about my Lifedrive and it took 18 months for the company to respond to the numerous complaints about the device with an update. Can you imagine that at Apple?

    At least if I have a problem, I can pop over to the Apple site and leave a message. It’s usually answered in 2 hours by fellow Apple owners. That’s the difference.

  5. At a certain level, there really isn’t a strictly ‘hardware guy’ as opposed to a ‘software guy.’ Especially if your work experience includes a few years in higher-up at Apple.

    MDN MW: analysis

  6. I liked Palm a lot, and they had amazing potential, but they completely screwed up big time by using Windows Mobile; that completely destroyed their brand image and their message of superior software+hardware integration capabilities. Who would trust their OS if they admit themselves that WinMob is the better OS for their high-end devices? Palm shot themselves in the foot big time. Whoever at Palm made that decision (to adopt WinMob) should be fired, roasted, grilled, chopped, executed, tortured, crushed, destroyed, and served to piranhas for breakfast.

  7. Maybe Apple is going to buy them…that is the only thing I can think of for that to be a good investment. I loved my old Palm, but it is history. Multi-touch(not pressure sensitive) with good intuitive software is the only thing that has a future.

Reader Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.