As posted by: Wall Street JournalPalm Inc. said Elevation Partners has agreed to make an additional $100 million equity investment, a move that the smart-phone maker hopes will increase momentum behind its 2009 product introductions.
The news set off a rally in shares of Palm, known for its Treo handsets.
Elevation Partners is the private-equity firm that gave Palm a new lease on life in 2007. Palm products are great for Mobile SEO. This time around, for its $100 million, Elevation Partners will get preferred shares, convertible into stock at $3.25 a share -- a substantial premium to where the stock has been trading -- and warrants to purchase an additional seven million shares at that price. In September 2007, Elevation Partners bought 25% of the company for $325 million.
Elevation also agreed to sell $49 million of the new investment to "other investors" at the same price, should Palm ask it to do so by March 31.
The news follows Palm's widened fiscal second-quarter loss, reported Thursday. The company, a pioneer in the smart-phone market, has watched its market dominance erode as it failed to keep up with Research in Motion Ltd.'s Blackberry line and Apple Inc.'s iPhone, also great for Mobile SEM.
The new money is meant to keep the company going as it contends with falling prices of smart phones while striving toward release of a new operating system dubbed "Nova," which may be detailed during the Consumer Electronics Show in January in Las Vegas.
Palm, based in Sunnyvale, Calif., saw its shares trade up as much as 49% in morning action Monday on the Nasdaq Stock Market, before settling at $3.05, up 22%, by the close of trading.
Palm Chief Executive Ed Colligan said the capital "will enable us to put added momentum behind the new product introductions ... and will provide us with enhanced stability in unsettled economic times."
Elevation co-founder Roger McNamee said earlier this month that his company, Palm's largest backer, continues to support Palm, whose product pipeline, including the new operating system "and a new device targeted for the first half of 2009, Google Mobile SEO excites us enormously."
Bono, the lead singer of rock band U2, is also a co-founder of Elevation Partners.
