Palm Gets $100 Million Boost - InformationWeek

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12/22/2008
02:23 PM
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Palm Gets $100 Million Boost

Elevation Partners' equity investment comes as the smartphone and PDA maker is set to unveil its Nova operating system and new handsets.




Palm Centro
(click for image gallery)
Palm's attempt to become a significant player in the smartphone market again received a boost Monday as private equity firm Elevation Partners agreed to make a $100 million equity investment in the company.

This investment is in addition to the $325 million the equity firm invested in Palm in October 2007 for strategic recapitalization, and it comes a few weeks before the smartphone and PDA maker is set to unveil its Nova operating system at the Consumer Electronics Show in January.

"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," said Roger McNamee, co-founder of Elevation Partners, in a statement. "Palm has an industry-leading team and an exciting, differentiated product road map."

Once the U.S. leader in the smartphone market, Palm has stumbled over the last few years and is being outsold by rivals Apple and Research In Motion. While the Centro has been a hit and sold more than 2 million units, the company has posted six consecutive quarterly losses.

But Palm is optimistic that Nova handsets will help the company become profitable again. While few details have emerged, executives said the new OS will focus on the mobile Internet and aim at the "fat middle" of the smartphone market between the iPhone 3G and BlackBerrys. Nova handsets are expected to hit the market in the first half of 2009, Palm executives said.

In its favor, Palm still has a dedicated user base that has fond attachments to their Treo smartphones. Additionally, the company has shaken up its management to prepare for the Nova lineup.

But the company is facing many hurdles to become a player again. As the price of high-end smartphones like the iPhone 3G and BlackBerry Storm dips, the "fat middle" may not be as fat as Palm needs to be successful.

Palm's greatest challenge may be getting U.S. carriers to support another operating system. The Palm Treo Pro was released earlier this year without a carrier subsidy, and despite positive reviews, it failed to sell well. Getting multiple carriers to support a new operating system could be tricky, especially as some carriers are looking to standardize on as few platforms as possible.

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