Palm Gains as Elevation Partners Invests $100 Million (Update1)
By Crayton Harrison
Dec. 22 (Bloomberg) -- Palm Inc., the money-losing maker of the Treo and Centro mobile phones, rose 22 percent in Nasdaq trading after investor Elevation Partners LP agreed to pay $100 million to increase its stake.
Elevation will get preferred stock that’s convertible into common shares at $3.25 each, Palm said today. The price is 31 percent more than Palm’s close Dec. 19. Elevation, whose managing directors include U2 singer Bono and private-equity investor Roger McNamee, bought a 25 percent stake in Palm last year.
The cash will help fund new products and cushion Palm from the economic slump, Chief Executive Officer Ed Colligan said in a statement. The phone maker, which posted its sixth straight loss last week, is working on new operating software to compete with Research In Motion Ltd.’s BlackBerry and Apple Inc.’s iPhone, which have wrested away customers for Web-surfing phones.
“If they put this additional money in, it improves their viability and a chance to get a return on the entire investment,” said James Faucette, an analyst at Pacific Crest Securities Inc. He expects the shares to outperform the broader market.
Palm, based in Sunnyvale, California, gained 56 cents to $3.05 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have dropped 52 percent this year.
Elevation’s Ownership
The investment will give Elevation a 39 percent stake in the company, Palm spokeswoman Lynn Fox said. Elevation also has warrants to buy 7 million shares at the same price, which would boost its ownership to 41 percent. Palm can make Elevation sell up to $49 million of the new investment at the same or better terms by March 31, according to the statement.
Palm may introduce the new Nova software at the Consumer Electronics Show next month in Las Vegas, said Portland, Oregon- based Faucette. Colligan said last week that handsets with the new software will be available in the first half of 2009. Palm ranks outside of the top five makers of smart phones, a category dominated by Nokia Oyj and Apple.
Palm Chairman Jonathan Rubinstein, who joined last year as part of the initial investment by Elevation, helped design Apple’s iPod music player. Apple’s iPhone became the most popular mobile phone among U.S. consumers last quarter, according to Port Washington, New York-based research firm NPD Group Inc.
To contact the reporter on this story: Crayton Harrison in Dallas at tharrison5@bloomberg.net
Last Updated: December 22, 2008 16:23 EST |
