Investor Elevation Partners backs Palm, despite woes
Monday, 22 March 2010
NEW YORK, Mar 21 (Reuters): Palm Inc's most influential investor, Elevation Partners, stood by the smartphone maker Friday, even as other shareholders bailed and analysts warned its days as an independent company may be numbered.
Palm shares tumbled 29 per cent Friday to a 14-month low as investors questioned its ability to compete in a tough smartphone market against Apple Inc, Google Inc and Research in Motion.
The sell-off was sparked by Palm's warning that its current-quarter revenue would be far below Wall Street's expectations -- the company's latest misstep after posting net losses for two fiscal years.
But Elevation, which bought a 25-per cent stake in Palm for $325 million in 2007, said the smartphone maker still has "enormous opportunity" and backed its management led by Chief Executive and Chairman Jon Rubinstein, a former member of Elevation who is also famous for developing Apple's iPod.
"Jon and his team have built the best mobile operating system available today and they are now working through short-term execution challenges with Elevation's complete support," Elevation said through a spokesman.
Elevation, a private equity firm that includes U2 lead singer Bono among its partners, has made three more investments in Palm since its initial deal, buying common stock, convertible preferred shares and warrants.
Elevation, which now controls roughly 30 per cent of Palm, has also named former Apple executives Fred Anderson and Roger McNamee to Palm's seven-member board.
While Palm's share price has plunged 72 per cent since the first deal in June 2007, the value of Elevation's investment has been maintained by the terms of the original deals.
Palm's filings show that Elevation has invested a total of $460 million in the company, an investment that is worth $432 million today based Friday's close of $4.00.
Few Wall Street analysts share Elevation's optimism on Palm, whose relatively small size means it does not have the same leverage with retailers or phone carriers as an Apple or Nokia or Motorola Inc.
Kaufman Bros analyst Shaw Wu cut his rating on the shares to "sell" from "hold."
Palm shares tumbled 29 per cent Friday to a 14-month low as investors questioned its ability to compete in a tough smartphone market against Apple Inc, Google Inc and Research in Motion.
The sell-off was sparked by Palm's warning that its current-quarter revenue would be far below Wall Street's expectations -- the company's latest misstep after posting net losses for two fiscal years.
But Elevation, which bought a 25-per cent stake in Palm for $325 million in 2007, said the smartphone maker still has "enormous opportunity" and backed its management led by Chief Executive and Chairman Jon Rubinstein, a former member of Elevation who is also famous for developing Apple's iPod.
"Jon and his team have built the best mobile operating system available today and they are now working through short-term execution challenges with Elevation's complete support," Elevation said through a spokesman.
Elevation, a private equity firm that includes U2 lead singer Bono among its partners, has made three more investments in Palm since its initial deal, buying common stock, convertible preferred shares and warrants.
Elevation, which now controls roughly 30 per cent of Palm, has also named former Apple executives Fred Anderson and Roger McNamee to Palm's seven-member board.
While Palm's share price has plunged 72 per cent since the first deal in June 2007, the value of Elevation's investment has been maintained by the terms of the original deals.
Palm's filings show that Elevation has invested a total of $460 million in the company, an investment that is worth $432 million today based Friday's close of $4.00.
Few Wall Street analysts share Elevation's optimism on Palm, whose relatively small size means it does not have the same leverage with retailers or phone carriers as an Apple or Nokia or Motorola Inc.
Kaufman Bros analyst Shaw Wu cut his rating on the shares to "sell" from "hold."