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Summary:

It must be Christmas, as the guys at Elevation Partners are feeling generous enough to invest another $100 million into beleaguered smartphone maker Palm, which has been slip-sliding away for a very long time. Elevation Partners, a Menlo Park, Calif.-based private equity firm headed by Roger […]

palmhqIt must be Christmas, as the guys at Elevation Partners are feeling generous enough to invest another $100 million into beleaguered smartphone maker Palm, which has been slip-sliding away for a very long time. Elevation Partners, a Menlo Park, Calif.-based private equity firm headed by Roger McNamee, previously invested $325 million in Palm (for about 25 percent of the company) and brought in new management — many of them former Apple executives — to save what was once an iconic brand and chief instigator of the smartphone revolution.

From the outside, none of those attempts seem to be working. Last week, the company reported a net loss of $506.2 million for its second quarter of fiscal 2009. Sales sank to $171 million and its shipments decreased 13 percent. In American Football terms, they have to feel like the Arizona Cardinals at the end of last night’s 47-7 drubbing by the New England Patriots. All this negativity was masked by the euphoria around the upcoming operating system, Nova, which is going to be released at CES this January. There are more handsets on the way and they are hoping to go after the “fat middle” of the smartphone market.

There are some things Palm can bank on: It has a big user base — between 7 and 8 million people are using Treos and are actually pretty thrilled with the aging devices; they can provide a good base on which to grow the company. In addition, there are a large number of application developers who continue to support the platform.

Management’s remarks encouraged the markets, which bid up the stock on Friday. No one seemed to notice that it’s almost a year late, and that we have a global meltdown with handset (including smartphone) sales sinking faster than a brick in water. Palm, like most vendors, is at the mercy of the carriers, which will ultimately decide the devices they want to push to the end users.

Given how closely AT&T is associated with Apple (neither can live without theother) and T-Mobile’s partnership with HTC, Palm has its work cut out for it. There is already talk of the new Google Phones, and I’m pretty sure Apple isn’t going to sit still and wait for Palm to stage a comeback.

My friend Pip Coburn often reminds me of Warren Buffett’s now famous adage: Turnarounds seldom turn.

 

Can Palm Be Saved?
( surveys) 

 

Terms of the deal

  1. Elevation will acquire 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 percent dividend rate.
  2. Elevation will also receive warrants to acquire 7 million shares of Palm common stock at the same price.
  3. 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.

From the archives:

Palm’s last stand, with a bit of Elevation.

  1. [...] who is it going to be?  Palm just got another $100M.  They have the money.  Do they have the vision?  There’s a poll on that link and when I [...]

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  2. Palm should go the OEM licensing route and concentrate on design, technology, R&D, and the NEXT big thing. Getting production and distribution off their books and backs will be a great relief.

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  3. I don’t understand Elevation Partner’s rationale here. Palm is clearly the Oldsmobile of smart-phone technology and has lost to Apple, Android, Samsung, Microsoft and others. Maybe there are some baby boomers who are using the Palm platform and aren’t capable of switching to something better, but I don’t see anyone using it anymore. I used it 8-9 years ago (has it been that long?) when it came out on the Samsung i-500? But then the typical Silicon Valley leader complacency took over and their platform aged faster than gorganzola left out on a hot day. The terms that EP got are crap. They could’ve waited longer and watched Palm slip into BK and picked up the entire company for much less. I mean it’s not like you have to worry about “talent” leaving the company, right? A. Define talent. B. Where they gonna go?

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  4. [...] seamless environment used on both long-running smartphones and netbooks, I think they have a shot. Om points out that Palm could use another life-line in the form of a partner since AT&T has Apple while T-Mobile is working with HTC and Google. [...]

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  5. Currently, in the iPhone-class OS space, there’s only Apple and Google Android. Both have new OSes. Everybody else has really old stuff. Palm’s new OS is a post-iPhone OS (like Android), so they have an opportunity to be the 3rd player in that space. I have a few friends who were recently hired there – some of the smartest guys around. I’m expecting something great.

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  6. Wannaknow More Monday, December 22, 2008

    > …Elevation will acquire newly issued Series C preferred stock that is convertible into Palm
    > common stock at a price of $3.25 per share…

    How MANY preferred shares did Elevation get, though?

    A rather critical number that has yet to be revealed.

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  7. [...] Read | Permalink | Email this | Comments [...]

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  8. [...] the fortunes of the flagging company? Palm’s biggest investor, Elevation Partners, is putting $100 million into that Nova, after already spending $325 million for 25 percent of the company last year. Maybe [...]

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  9. Palm has an opportunity here :

    1) The iPhone killers are not here inspite of the os being out for 18 months. Only iPhone like os is the google android, But that does have its own issues – It does not have exchange sync to begin with – The only GPhoneout there is a crappy looking device !
    2) Existing OS’s are having a tough time becoming touch(y) – The BB Storm by some accounts is a dud. The Nokia touch device is far out and costs as much as a kidney transplant. Palm does have a sliver of opportunity to create a great OS.
    3) The ‘traditional’ mobile phone companies Samsung and LG seem to have settled on Windows Mobile as their smart phone os of choice – It is a shitty OS and the copied badly from iPhone version (WinMo7) is delayed by another year !l
    4) The iPhone 3g inspite of being revolutionary in plenty of ways has had plenty of issues. A browser which crashes every 5 minutes and incredibly bad battery life to touch on two. (Note And yet I would not give up my iPhone any day )

    Basically as the commentor noted above, Palm seems to have some great talent ….And if Nova does not turn out to be a dud. It will be great acquisition target for somebody like Samsung or Nokia…

    The financial crisis makes things hard for palm, But if you are a carrier like Sprint, Verizon or Tmobile. You need a phone to rein in the mass exodus to ATT. All I am saying is give palm a chance !

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  10. It seems as if Sprint has been Palm’s savior as of late and Sprint really needs a true iClone. Possible partnership material.

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  11. I used to be a Treo chearleader, but …. not for a long time. The iPhone is the device to beat and that will be hard. Only if Apple sleeps on its laurels like it did with the Mac, the iPhone can loose ground.

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  12. [...] the fortunes of the flagging company? Palm’s biggest investor, Elevation Partners, is putting $100 million into that Nova, after already spending $325 million for 25 percent of the company last year. Maybe [...]

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  13. [...] the fortunes of the flagging company? Palm’s biggest investor, Elevation Partners, is putting $100 million into that Nova, after already spending $325 million for 25 percent of the company last year. Maybe [...]

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  14. [...] the fortunes of the flagging company? Palm’s biggest investor, Elevation Partners, is putting 0 million into that Nova, after already spending 5 million for 25 percent of the company last year. Maybe all [...]

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  15. I think the Palm name still says “I am productive.” and not “I’m cool, look at me!”

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  16. [...] Read | Permalink | Email this | Comments [...]

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  17. I don’t think the Palm name says “I am productive.” per se, I think it says “I don’t know that there are better options out there” or “I’m set in my ways, I don’t like changing things.”

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  18. OM – It’s worth noting that RIM also got a boost last week due mostly to much better than expected sales of the Blackberry Storm (in the US, exclusive to Verizon)

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  19. I mean, who exactly is Palm’s customer base? Cutting edge consumers? No, that’s iPhone and Android territory now. Business users? No, that’s Microsoft and RIMs territory. Even complacent, average consumers made the WinMo6 based Blackjack II the best selling phone for 2008. To convince anyone to consider them again, Nova not only has to be as good as iPhone and Android, it has to be compellingly better. I don’t see Apple or Google resting on their laurels anytime soon. Even as an acquisition target they are unattractive, to me the Palm brand name has about as much cache as Commodore or Amiga, nothing more than distant nostalgia.

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  20. Let’s be honest guys, Palm is toasted.

    Treos are WinMo phones, not that any other company can come up with a similar or even better device.

    They never released the Linux-based PalmOS, their UI has been the same since 2003, compared to the iphone, palm’s products are obsolete, the centro is a zire with phone capabilities, thats it.

    With the (almost) $500M this VC has poured into palm they could have funded an innovative startup with new ideas for a change….

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  21. [...] the fortunes of the flagging company? Palm’s biggest investor, Elevation Partners, is putting $100 million into that Nova, after already spending $325 million for 25 percent of the company last year. Maybe [...]

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  22. [...] is why the $100m from Elevation is crucial. Even before the global economy started sputtering to standstill, Palm was on the ropes. It was [...]

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  23. PALM needs an Android to lift it up from the pits.

    I still like my PALM OS though and all the useful applications that are availble for it.

    PALM invented the wheel and then took the long nap behind it.

    WAKE UP….

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  24. [...] Another $100 Million for Palm from Bono & Elevation Partners GIGAOM It must be Christmas, as the guys at Elevation Partners are feeling generous enough to invest another $100 million into beleaguered smartphone maker Palm, which has been slip-sliding away for a very long time. Elevation Partners, a Menlo Park, Calif.-based private equity firm headed by Roger McNamee, previously invested $325 million in Palm (for about 25 percent of the company) and brought in new management – many of them former Apple executives – to save what was once an iconic brand and chief instigator of the smartphone revolution. Source> [...]

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  25. [...] Silicon Valley can help Detroit? Kleiner’s Lane thinks so – Kleiner Perkins partner Ray Lane says Fisker, the electric vehicle company he has backed, will make 500,000 vehicles for between $200 million or $300 million. “I don’t need a billion dollars,” Lane says, arguing that Detroit’s Big 3 should outsource their innovation to companies like Fisker. Elevation Partners invests another $100 million in Palm — Palm, the mobile device maker, which has struggled lately amid severe competition from the iPhone an…. [...]

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  26. [...] is why the $100m from Elevation is crucial. Even before the global economy started sputtering to standstill, Palm was on the ropes. It was [...]

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  27. [...] the fortunes of the flagging company? Palm’s biggest investor, Elevation Partners, is putting $100 million into that Nova, after already spending $325 million for 25 percent of the company last year. Maybe [...]

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  28. [...] Another $100 Million for Palm From Bono & Pals [...]

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  29. [...] fiscal year, and a 13 percent drop in smartphone sales. Analyst Jack Gold of J. Gold Associates told the San Francisco Chronicle, “This is Palm’s last gasp.” In addition to the new phone and the new OS, [...]

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  30. [...] thing is for certain: Private equity firm Elevation Partners’ $100 million investment in Palm in late December looks very smart right about [...]

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  31. [...] million, and its shipments decreased 13 percent. It had to go to McNamee’s Elevation Partners to get $100 million in funding to keep [...]

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  32. [...] markkinaosuuden ja myynnin myötä ja 2Q:lla yhtiö teki 500 miljoonaa dollaria tappiota. No Palm sai 100 miljoonan dollarin lisärahoituksen U2:n Bonolta. Bono ja kumppani olivat sijoittaneet jo aiemmin yli 300 miljoonaa yhtiöön ja saaneet houkuteltua [...]

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  33. [...] company to many investors and has seen its share plummet.  But here are 2 points to consider: 1) Elevation Partners upped its own ante by putting in $100M funding in the company and brought in ex-Apple exec Jon Rubinstein who spearheaded the iPod development; [...]

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  34. [...] Another $100 Million for Palm From Bono & Pals ( GigaOM ) Possibly related posts: (automatically generated)Palm sells 25% stake to Bono and former Apple execs for $325 millionBono – Africa’s Hope?Palm nabs another $100m from Elevation Partners, takes it to the bridgeBono Honored [...]

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  35. [...] While there’s no guarantee Palm will succeed with WebOS, they’ve got a ton of buzz, a ton of investment, and a positive track record in this space. If I were Sling, I’d be banging down Palm’s [...]

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  36. [...] There have been a few stories that caught my eye in between shoveling snow (and yes, it’s still snowing in Spokane. We got another 3-4 inches here last night). Another $100 Million for Palm From Bono & Pals [...]

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  37. [...] for as much as $12.90. The Pre has been driving Palm’s stock since December, after it raised more money from its private equity backers, and rumors of the Pre started percolating. It also saw its largest volume of trading on Jan. 9, [...]

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  38. PALM has done good all things considered. The stock is ready for another bounce IMO.

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