Elevation Injects $100 Million Into Palm

Elevation PartnersPalm, 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.

Shares of PALM are up sharply on the news this morning on higher than average volume. At the time of publication, the price is currently trading up 20%, around the $3 mark.

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. "Elevation has been a great partner to Palm, and we appreciate their continued confidence and support."

"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," stated Roger McNamee, co-founder of Elevation Partners.

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

Update: Palm shares closed at 3.05 today, up 0.56 (22.49%) on the day.

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Throwing good money after bad?

SeldomVisitor @ 12/22/2008 6:15:45 AM # Q
Elevation Partners bought Yet Another Large Chunk of Palm with another $100 million. as before, the shares EP bought are more important that Ma-n-Pa shares.


RE: Throwing good money after bad?
mikecane @ 12/22/2008 7:56:15 AM # Q
How does that work out for the average shareholder. I mean, what's the downsides?

1) Do EP shares get max profit shares?
2) If they do Chap 11, avg shares are zeroed out?
3) If they go private, can they screw the avg shares?

I noted the additional $100M a few minutes ago. You beat me here.

RE: Throwing good money after bad?
SeldomVisitor @ 12/22/2008 8:14:02 AM # Q
Preferred shares get a piece of whatever's left of the company before common shares.

For example, the PREVIOUS preferred chunk of shares was worth $325 million. Up to that amount of Palm value THOSE shares get their bucks back. Only AFTER that $325 million is used up do the common shares start getting THEIRS back.

We don't know the details of the current deal since Palm hasn't made their required SEC filing yet - for all we know EP owns more than half the company now...


RE: Throwing good money after bad?
AdamaDBrown @ 12/22/2008 9:00:02 AM # Q
A couple people on Brighthand commented that this showed EP must have seen Nova and been sure it would be a hit. My response:

One would think so, but by the same token, one wouldn't have expected them to spend $325 million buying a quarter of a company that was tanking, which was what they originally did with Palm. Investors and investment firms are not infallible: a lot of the time their estimates and opinions are no better than industry experts outside the loop. As the saying goes, it's difficult to make predictions, especially about the future.

This move signals that Elevation Partners thinks their best bet of recovering their money is to keep Palm alive for awhile longer, and they're willing to wager another $100 million on that . Beyond that, I wouldn't read any guarantees into this.

RE: Throwing good money after bad?
mikecane @ 12/22/2008 9:53:00 AM # Q
>>>Preferred shares get a piece of whatever's left of the company before common shares.

OK, but then there are the eejits in the outside world who will run up the stock valuation too.

For those who missed it, I still say Palm has something big:
http://mikecane2008.wordpress.com/2008/12/15/palm-revenge-of-the-nerdi/

A few weeks will tell.

RE: Throwing good money after bad?
SeldomVisitor @ 12/22/2008 9:58:41 AM # Q
Need to remember this new deal is WAY dilutive to the common shares AND we do NOT know what Elevation Partners got for their $100,000,000.

At the time of the deal the price was about $2.50/share - that suggests 40,000,000 common shares minimally (or equivalent) is what they got. Well, 40,000,000 shares + that extra 7 megashare chunk they can buy if they want is right near that magical "We own 50+% of the company," I believe.

The SEC filing about this is uber-important to see just how things are REALLY turnig out.

RE: Throwing good money after bad?
SeldomVisitor @ 12/22/2008 12:10:00 PM # Q
a SEC filing has been made - more to come. They own 38-ish % of Palm now.

RE: Throwing good money after bad?
CFreymarc @ 12/24/2008 12:53:06 PM # Q
The old "in for a Penny" adage applies here. IMO, with Nova allegedly going public the first weeks of the year, I think they are betting this will boost up the company and the price. How much of a boost is a good question. Will Palm be sold off and all parties can cash in? Who knows. If anyone can get out of their NDAs, a good book deal about the last four years at Palm is begging to be sprung.
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Apple raises the bet by one iPhone Nano

mikecane @ 12/22/2008 9:50:40 AM # Q
Case manufacturer XSKN spilling the beans on iPhone nano?
http://www.tuaw.com/2008/12/22/case-manufacturer-xskn-spilling-the-beans-on-iphone-nano/

Well, fine, call me stupid, but I don't see the point of an iPhone Nano. I suspect it'd be something to compete against the Razr - but with so wee a screen, it'd be worse than a Centro!

iPhone Nano: Half the phone, one-eighth the capabilities.

RE: Apple raises the bet by one iPhone Nano
SeldomVisitor @ 12/22/2008 9:55:08 AM # Q
Maybe it's not supposed to be a PDA - just a phone and music player.

RE: Apple raises the bet by one iPhone Nano
AdamaDBrown @ 12/22/2008 10:07:33 AM # Q
I'd tend to doubt the existence of an iPhone Nano too: unless Apple found a compelling reason to produce a little sibling to the main iPhone, what's the point? Just to make it smaller? Most people aren't complaining now, and the few extra sales they'd net wouldn't really make up for the cost of another production line, etc..

RE: Apple raises the bet by one iPhone Nano
mikecane @ 12/23/2008 11:01:51 AM # Q
Well, here we go again...

More iPhone Nano Case Design Photos
http://www.macrumors.com/2008/12/23/more-iphone-nano-case-design-photos/

What will the tagline be?

Smaller, Cheaper, Faster?

Looks like Apple has just killed Gekko's Playskool Centro.

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How can this be anything but good news?

hgoldner @ 12/22/2008 10:06:31 AM # Q
To those who do not see the bright side of this article: Do YOU have $100,000,000 sitting around somewhere you don't know what to do with? Are you so jaded that continual talk of billion and trillion dollar government bail-outs to industries where executives are making six and seven figure bonuses despite running their companies into the ground has you losing sight of how large $100,000,000 is?

The only conclusion one can reach from this news is that:

1. Elevation Partners has seen Nova and probably even prototype devices;
2. EP believes Palm can pull out of the nosedive in 2009; and
3. EP believes there will be a significant pay-off for their bucks.

It is very easy to be cynical and cavalier and to bash Palm further, but the bottom line is that this has to be good news for Palm fans.

One thing's for sure, it ain't going to be another Foleo. And, given that Apple actually does not have any huge announcements on the horizon any time soon, Palm has a chance to be the superstars of CES and grab lots of headlines in January.

I wouldn't be surprised to start seeing more leaks within the next week or two via Engadget or Boy Genius. Palm has never been as good at locking down leaks as Apple has.

Harold

RE: How can this be anything but good news?
SeldomVisitor @ 12/22/2008 10:08:36 AM # Q
Elevation invested $300 megabucks in Palm AFTER ==full disclosure== of what Palm was doing and what they had planned.

They bought in at $8.50/share.

They fairly promptly saw that investment drop to (much) less than half its value.

Why do you think now is ANY different?

RE: How can this be anything but good news?
AdamaDBrown @ 12/22/2008 10:17:20 AM # Q
The key phrase here is "EP believes." They also believed that Palm would make a great investment last year, but instead they lost $200 million on the deal already. As the current state of the financial industry proves, just because you have money doesn't mean you're always right about what to do with it.

I strongly encourage caution. If Nova turns out to be the biggest thing since sliced bread, great. But the building of unbridled expectations typically only results in disappointment.

RE: How can this be anything but good news?
nastebu @ 12/22/2008 10:19:43 AM # Q
Sure, Elevation Partners *must* know what they're doing. Because if the last six months has taught me anything, it's that Wall Street folks always know what they're doing and never take mind boggling stupid risks.

Elevation Partners is in for a penny, in for a pound. Sure this is good news. When you're drowning, someone throwing you a life vest is very good news. It would be even better news if Palm had actually made some money in the quarter and didn't need $100,000 million in re-financing.

RE: How can this be anything but good news?
jptx @ 12/22/2008 1:16:07 PM # Q
Maybe NOVA rocks????

RE: How can this be anything but good news?
AdamaDBrown @ 12/22/2008 2:17:47 PM # Q
Maybe. But the central point is that EP's additional $100 million shouldn't be taken as a sign that Palm has the next Godphone (TM) under their hat, any more than their $325 million last year was proof the stock was going to rise when it did exactly the opposite.

The only way to know about Nova is to wait and see.

RE: How can this be anything but good news?
Gekko @ 12/22/2008 2:59:09 PM # Q

the sheep are slow to catch on.

RE: How can this be anything but good news?
CFreymarc @ 12/24/2008 12:58:11 PM # Q
I think it was said best years ago, "Money is like a horse, to keep it and stay on top of it, you need to know how to ride it so it won't get away." When I see someone with the portfolio and the success, then their opinion is worth something. The rest of the chatter here is bar talk for those afraid sit down at a rail.
RE: How can this be anything but good news?
AdamaDBrown @ 12/24/2008 1:39:31 PM # Q
When I see someone with the portfolio and the success, then their opinion is worth something.

Tell that to the stockbroker who killed himself today because he'd lost $1.4 billion to Bernie Madoff.

RE: How can this be anything but good news?
SeldomVisitor @ 12/24/2008 3:05:23 PM # Q
I certainly hope you're not talking about Elevation Partners!

I think they have something like 5 major investments and ONE success so far.

RE: How can this be anything but good news?
erazer @ 12/24/2008 6:24:39 PM # Q
Two of PALM's biggest shareholders, Fidelity and T. Rowe Price, recently increased their positions after meeting with Ed Colligan. McNamee (Elevations' chief) made it big as a buy-side investment manager for the latter before he came to Elevation.

RE: How can this be anything but good news?
SeldomVisitor @ 12/25/2008 5:45:07 AM # Q
RE: How can this be anything but good news?
Gekko @ 12/27/2008 8:33:55 AM # Q

"Do not be fooled into believing that because a man is rich he is necessarily smart. There is ample proof to the contrary." - Julius Rosenwald

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ever been to the casino or the track?

Gekko @ 12/22/2008 1:56:52 PM # Q

double down, baby!!!!!!!!!

RE: ever been to the casino or the track?
SeldomVisitor @ 12/22/2008 2:00:55 PM # Q
Ah...you understand.

RE: ever been to the casino or the track?
Gekko @ 12/22/2008 2:37:23 PM # Q

just like a hooker she said "nothing's for free"...

http://www.youtube.com/watch?v=qsTZtI3l1Hs


Reply to this comment

LOL

PadOPaper @ 12/22/2008 8:48:48 PM # Q
what do you guys think about everyone here listing out in their posting signatures how many shares of palm they own or are shorting. Would be interesting to see who is talk and who puts there money where their mouth is. :) Assuming of course that people would be honest about their holdings in this stock.

Who needs expensive gadgets, give me a pencil and some post-its. Added benefit, perfect handwriting recognition.
RE: LOL
mikecane @ 12/23/2008 8:02:01 AM # Q
For the record, I don't own any Palm stock.

(Let me do Gekko's follow-up post: "It's probably because you can't afford any." When the Revolution begins, Comreades, forget the lawyers. The first thing we do is kill all the Lexus owners!)

RE: LOL
mikecane @ 12/23/2008 8:04:37 AM # Q
Oh, let me be more clear about that: I have ZERO financial interest in Palm either stock-wise, investment-wise, developer-wise, or in any way, shape, or form that would put money *in* my pocket.

If anything, Palm would be *taking* money from me by producing what I think they'll be producing.

If I ever held Palm shares, in any manner, I'd disclose.

And it's not just Palm, btw, I own nothing of Apple or Sony, either - with all the addenda listed above in para one.

RE: LOL
Gekko @ 12/23/2008 9:14:31 AM # Q

it's time to monetize the Doom Blog for 2009!!!

RE: LOL
Gekko @ 12/23/2008 9:32:57 AM # Q
RE: LOL
mikecane @ 12/24/2008 7:09:04 AM # Q
>>>it's time to monetize the Doom Blog for 2009!!!

Man, I told you I'm NOT doing Doom in 2009 if I blog. All of you will be having Doom for breakfast, lunch, dinner, and nightmares.

I should do a Fun, Happy Blog - to drive you all mad.

RE: LOL
Gekko @ 12/24/2008 10:51:54 AM # Q

Despite shrill predictions of The Apocalypse, life will go on in 2009 - and there will be a 2010.

RE: LOL
CFreymarc @ 12/24/2008 1:00:24 PM # Q
And those to don't give the doomsayers the time of day will be laughing to the bank!
RE: LOL
mikecane @ 12/24/2008 5:06:14 PM # Q
>>>And those to don't give the doomsayers the time of day will be laughing to the bank!

Running to the bank - in tears.

RE: LOL
Gekko @ 12/24/2008 8:15:51 PM # Q

"I decline to accept the end of man. It is easy enough to say that man is immortal because he will endure: that when the last ding-dong of doom has clanged and faded from the last worthless rock hanging tideless in the last red and dying evening, that even then there will still be one more sound-that of his puny inexhaustible voice, still talking. I refuse to accept this. I believe that man will not merely endure: He will prevail. He is immortal, not because he alone among creatures has an inexhaustible voice, but because he has a soul, a spirit capable of compassion and sacrifice and endurance." - William Faulkner

Reply to this comment

Lemon

Nycran @ 12/23/2008 6:30:14 AM # Q
She's gonna make you cry
She's gonna make you whisper and moan
And when you're dry
She draws her water from the stone

And I feel
Like I'm slowly, slowly, slowly slipping under
And I feel
Like I'm holding onto nothing

Reply to this comment

Bono and Steve Jobs No Longer BFFs

Gekko @ 12/23/2008 2:16:18 PM # Q

Nerdfight
Bono and Steve Jobs No Longer BFFs
By Owen Thomas, 4:47 PM on Mon Dec 22 2008, 12,398 views

What did Steve Jobs do to his old buddy Bono? The Irish rock star, once the Apple CEO's adoring buddy, is funding the most credible threat to the iPhone yet.

Bono is a founder of Elevation Partners, the Silicon Valley private-equity firm named after the U2 song. And Elevation just sank another $100 million into Palm, the troubled smartphone maker. Palm, which waited too long to switch its product lineup from electronic organizers to souped-up cell phones and whose Treo smartphone is showing its age, lost more than $500 million in the most recent quarter. Bono's firm now owns 39 percent of Palm.

He's also lassoed several former Apple executives into the Palm corral. Fred Anderson, a former Apple CFO and board member, is an investor at Elevation. Jon Rubinstein, a hardware executive who served as Jobs's right-hand man at Apple, resigned in 2006 one day before the company's 30-year anniversary and joined Palm a year ago. Rubinstein, the company's executive chairman, is working on a new family of devices that will compete with Apple's iPhone; the big unveiling is planned for the CES computer trade show next month.

The last CES was also the scene of the latest dig by Bono at Jobs. In January 2008, he appeared in a farewell video for Microsoft chairman Bill Gates. Later that month, he shilled for Michael Dell, the founder of the eponymous PC maker who once called for Jobs to shut down Apple and "return the money to shareholders." (Apple is now worth far more than Dell. Ha!)

And to think they were once so close. At an Apple event in 2003, Bono called Jobs "the Dalai Lamai of integration." One year later, Bono and Jobs introduced a U2-branded edition of the iPod. Jobs, who is rarely seen in public, attended a U2 concert in 2005, and Bono praised Apple as being "more creative than a lot of rock bands." In 2006, Bono promoted a red iPod for his Product (Red) charity scheme.

So what happened? The falling out has never been publicly explained, but I have a theory on what happened.

Apple's board of directors fingered Fred Anderson, the former Apple CFO, in a probe over stock-options backdating at Apple. In a public statement, Anderson blamed Jobs. Things got messy, and Anderson resigned from the board after reaching a settlement with the SEC.

At that point, Anderson was already at Elevation helping make Bono, whose net worth is estimated in the hundreds of millions of dollars, even richer. So Jobs wasn't just messing with Bono's pal; he was messing with his pocketbook.

It hardly squares with the Irish rocker's saintly save-the-children image, does it?

http://valleywag.gawker.com/5116142/bono-and-steve-jobs-no-longer-bffs

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