Elevation Partners Pumps $100 Million into Palm

Elevation Partners, the private-equity firm that already owns 25% of this company, has recently expressed confidence in Palm and its upcoming operating system, is putting its money where its mouth is, and has agreed to make an additional $100 million equity investment in Palm.

"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.

Buying Stock 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% premium to the closing price of Palm common stock on Dec. 19. This Series C preferred stock will not earn dividends.

Elevation will also receive warrants to acquire 7 million shares of Palm common stock at the same price, $3.25 per share.

As it stands now, this private-equity firm will soon own 39% of Palm. However, prior to March 31, 2009, Palm may decide 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.

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

Palm in Transition

Colligan and McNamee are referring to Palm's next operating system -- code-named Nova -- and the first smartphones running it, which are expected to be unveiled at the Consumer Electronics Show early next month. This is expected to combine new and old, with new product designs running an updated operating system, but including backward compatibility with the current library of Palm OS software.

It will replace the aging Palm OS and power this company's consumer-oriented models. It's enterprise models will continue to use Windows Mobile.