GigaOM

Last week, at the D conference, I watched Jeff Hawkins, Palm’s Chairman show off Foleo, a new companion device to its Treo devices, in front of a packed audience. As I stood in the aisles, it became quickly obvious that many were not that interested in the new device, busy checking their emails on their Blackberrys. Others just simply walked out of the room. Foleo, more like fold-up-and-go!

It was a limp attempt by a company whose resident tech genius, aka Hawkins, is more enamored with his brain-start-up, to capture some of the old magic. In fact, that one demo showed that Palm was a visage of its former self, klike an aging diva, it is walking on a faded red carpet, wearing threads from another era, but not realizing that the world has moved on to prettier, shiner and sexier things.

It has lost the attention of its core demographic – the Silicon Valley tech elite – and if that wasn’t enough, Apple’s new iPhone is about 28 days from launch. Sure it has the developers, and lots of applications, but even on that front its not all peaches and champagne. Windows Mobile is coming on strong and is becoming more and more attractive to the developers.

Well, maybe selling out to anyone did seem like a good idea.

So they did – 25% of the company is being bought by Elevation Partners for $325 million. As part of the deal, Elevation gets a new series of convertible preferred stock. The stock will convert at $8.50 per share, a premium of approximately 16 percent to the implied post-distribution price over the 10 trading days ended June 1, 2007, excluding the $9 per share cash distribution.

The deal involves a massive overhaul of the board. Fred Anderson (former Apple CFO) and Elevation Partners managing director Roger McNamee will join Palm’s board of directors. Jon Rubenstein (of iPod fame) will be the Chairman of the board.

I find it ironic that only 25% of the company was sold. Does that mean there were no takers for the whole thing? This is a bit of a loser deal, as 24/7 Wall Street points out. Palm will add about $400 million in debt, in order to offer $9 a share in cash as part of this planned recapitalization. Total current assets of the company as of February 28, 2007 according to their latest 10Q filings were about $914 million.

This move while generate a lot of attention, isn’t likely to save the company, despite what the new board does. I wrote about this in my previous post: “Palm’s current state of affairs is a result of haphazard management practices and a sad tale of a company that got whip lashed by the rapid technological changes that rewarded scale more than innovation.” None of that has changed!