Palm sells 25% stake to Elevation Partners

Amid continued speculation that a sale was in the offing, Palm has sold a quarter of its business to private equity firm Elevation Partners, which boasts Bono, lead singer of group U2 as one of its co-founders and managing directors.

It is hoping that the move, expected to close in the third quarter of this year, will revitalise Palm's offerings and, according to the company itself, help "lead the next phase of the smartphone and mobile-computing markets."

Once the deal has closed - which will see Elevation Partners invest $325 million to supplement more than $400 million from the handheld maker's existing coffers and new debt - Palm will appoint Jon Rubinstein, former senior vice president of hardware engineering and head of the iPod division at Apple as executive chairman of the board.

Fred Anderson and Roger McNamee, both managing directors and co-founders of Elevation Partners, will also join Palm's board of directors, replacing Eric Benhamou and D. Scott Mercer and increasing board director numbers from eight to nine.

"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," said Ed Colligan, Palm president and chief executive.

"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 recapitalisation provides an immediate return on their investments and our shareholders will retain their ability to participate in the company's success and future growth."

Rubinstein is clearly excited by the challenges that lie ahead. "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," he said.

"Approximately one 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."

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