Private investment firm greases Palm

Struggling to regain its edge in the smartphone market, Palm has reached an agreement to sell a quarter of the company to a private equity firm and to place a former iPod guru in an executive seat.

Elevation Partners will pay a special distribution of $8.50 per share, or about $940m of convertible preferred Palm stock, to take its stake. The company also agreed to invest $325m into the company.

As a part of the deal, Jon Rubinstein, the former Apple executive behind its iPod division, will join Palm as its executive chairman of the board. Managing directors at Elevation Fred Anderson and Roger McNamee will also take board seats.

Anderson, the former CFO at Apple, recently settled with the Securities and Exchange Commission on charges related to stock option backdating. He agreed to pay back approximately $3.5m without admitting guilt to make up for personal gains in the scandal.

"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," Palm CEO Ed Colligan said.

Palm is best known for its Treo line of smartphones. The company began its latest revitalization attempt last week with the announcement of a "smartphone companion product," the Foleo.

Elevation's investment — the $1.9bn private equity firm's largest to date — will help Palm fight against competitors in the smartphone game with deeper pockets. Mobile phone makers are currently bracing themselves for the potential impact of Apple's iPhone due out on June 29. ®

Bootnote

Notably among Elevation's five partners is Bono, lead singer of U2. The Register ventures to guess he doesn't sit in on too many board meetings.