From the Palm press release:
Palm, Inc., (Nasdaq:PALM) today announced a strategic relationship with the private-equity firm Elevation Partners ("Elevation") and a recapitalization plan that will position Palm to lead the next phase of the smartphone and mobile-computing markets. Under the planned recapitalization, shareholders will receive a $9 per share cash distribution. Elevation will invest $325 million in Palm, and the company will utilize these proceeds along with existing cash and $400 million of new debt to finance the cash distribution.
This means that Palm has sold off a 25% stake in the company to Elevation partners, a private investment firm that includes luminaries such as musician Bono and iPod pioneer Jon Rubenstein, formerly of Apple Inc. This is a sudden, and somewhat shocking bit of news, however it is my opinion that it is good news. The entertainment focus of Elevation should be beneficial in creating a more media-centric line of Treos, bringing them more in line with consumer tastes as well as those of the corporate world.
This is not just a silent investment either. Some changes will be taking place in the Palm corporate structure:
Upon closing of the transaction, Jon Rubinstein, former senior vice president of hardware engineering and head of the iPod division at Apple, will join Palm as executive chairman of the board.Fred Anderson and Roger McNamee, managing directors and co-founders of Elevation, will join Palm's board of directors upon closing of the transaction. Rubinstein, Anderson, and McNamee will replace Eric Benhamou and D. Scott Mercer, who will resign from Palm's board of directors at that time. The total number of directors on the board will be increased from eight to nine in connection with the transaction.
This is a big change in leadership, and promises a new vision and new direction for Palm as compared to the current direction under Ed Colligan. However, Colligan is throwing his support behind this change as he had this to say:
"As a result of this transaction, we will strengthen the Palm leadership team and create a more effective capital structure, which puts us in a great position to attract new talent, significantly strengthen our execution capabilities, and deliver long-term shareholder value. Jon Rubinstein is one of the top engineering executives in Silicon Valley, and he will lead our product-development efforts. As a significant new investor, Elevation brings onboard unique partners and relationships, plus a long investment horizon. For shareholders, the recapitalization provides an immediate return on their investments and our shareholders will retain their ability to participate in the company's success and future growth.
Now while it signals a drastic change in vision and direction, it seems that Rubinstein will also respect the direction Palm has taken thus far:
"I have tremendous respect for Ed Colligan, Jeff Hawkins and their team, and I am thrilled by the prospect of helping Palm deliver innovative products capable of transforming the mobile-device market. Approximately 1 billion cell phones are sold each year, and mobile computing is a category with enormous potential. This is a company with an impressive history of introducing game-changing products -- it pioneered the smartphone -- and I intend to help extend that legacy."
Personally, I see this news as exciting. Rubinstein was masterful in making the iPod what it is today, and anyone who uses a Treo can see where adding some consumer appeal to it would create a monster portable convergence device. Using the same hallmarks of simplicity that propelled the iPod to the top of the audio heap, and improving the overall design of the Treo would be a huge step forward. Innovation in convergence would also fuel a great push for Palm.
It will be an exciting few months as we see just what Elevation has in mind to steer Palm towards the future. You can be sure we'll be watching with great interest, especially after the foundering release of the Foleo, to see if Palm can recapture a little magic in the eyes of its customers.
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