Palm sells 25 percent stake to Elevation for $325M — Apple ghost follows
Palm Inc., the smart-phone maker, will reportedly sell a 25 percent stake to a private equity firm Elevation Partners, of Silicon Valley, for $325 million.
The move, reported by the WSJ, comes after two years of a sideways trading stock (see chart below), a recognition that Palm faces ever increasing competition, and indecision about what strategy it should pursue.
It also comes after a former employee of Palm, Gibu Thomas, argued in a column at VentureBeat recently that Palm should not sell to a private equity firm. There, he argued that Palm should get over aspirations to be the “next Apple,” and sell to a corporate strategic investor — because the forces of competition are too great.
Selling a stake to a private equity buyer keeps Palm’s independent aspirations alive — because a private equity buyer is more likely to try to want to restructure Palm and sell off its stake again down the road.
Notably, Elevation Partners has ties with Apple, and it plans to introduce some former Apple talent to the Sunnyvale, Calif.-based Palm. Jon Rubinstein (pictured above left), Apple’s former head of hardware who helped oversee the creation of the iPod music player, will join Palm as executive chairman and head up product development, according to the WSJ. Fred Anderson, a partner at Elevation, was a former Apple chief financial officer, will join Palm’s board (recently his relationship has soured with Apple’s Steve Jobs). Another Elevation partner, U2′s Bono, helped introduce the U2 iPod. And of course, Roger McNamee, another partner at Elevation, known for the prolific devices that adorn his belt — now likely to carry both a Palm Treo and an iPod — will also reportedly join the board.
This all comes, of course, just as Apple is to unleash its highly anticipated iPhone. And Palm recently unveiled the rather perplexing Foleo — designed to be a companion to Palm’s smartphones, but never quite making the case as to why it is any better than a laptop (at least in our view).
According to the WSJ, Palm will “pay $940 million in cash, or about $9 a share, to existing shareholders whose ownership of the company will drop to 75 percent under the deal’s terms. The company will fund the restructuring with the $325 million from Elevation, $400 million in new debt and more than $200 million of cash on its balance sheet to complete the transaction.
According to the terms, Elevation is paying a 16 percent premium on Palm’s price, the WSJ said.
Next Story: Brash raises $400M for new video game company
Previous Story: Amp'd Mobile files for banktrupcy
About the Author, Matt Marshall
Matt launched VentureBeat in September of 2006, with the realization that no one else was covering the entrepreneurial and tech innovation scene with the velocity or depth that he was. Prior to founding VentureBeat, he covered venture capital for the San Jose Mercury News from 2001 to 2006. In 2002, Matt was awarded "Journalist of the Year" by the Northern California Society of Professional Journalists. Prior to working at the Merc, he was a correspondent for the Wall Street Journal in Bonn, Germany from 1995 to 1998, and a writer for the Washington Post in 1994. Matt holds a PhD in Government and an MA in German and European Studies from Georgetown University. In addition to VentureBeat, Matt is also the Executive Producer of DEMO, the leading launchpad event for emerging technologies.
