Palm Sells A Quarter Slice To Elevation Partners
On Monday Palm announced that it had formed a strategic relationship with the private-equity firm Elevation Partners who has purchased a 25% equity stake of the company for $325 million – an investment that comes after months of rumours about a possible Palm sale and CEO Ed Colligan acknowledged that “"We were approached by larger parties over the last six months," and "the reality is that we thought this [Elevation] was the best outcome for our business and our investors." .
Interestingly, aside from a cash infusion the deal brings two former key senior Apple Computer executives to work their magic at Palm. The first is Jon Rubinstein a technical guru who famously headed the iPod division at Apple and will now join the board as executive chairman and lead Palm’s hardware design and manufacturing alongside Jeff Hawkins. The second is Elevation co-founder and Managing Director Fred Anderson – the former Apple CFO credited with completely revamping the company’s finances from 1996 to 2004 – who also joins Palm’s board.
Even more interesting for me is the fact that Elevation’s mission is to “help media and entertainment businesses develop and market great content, take advantage of new platforms and channels, and address demand in new geographies”. I therefore have no doubt that this deal now signals an important change in direction for Palm and the future development of our Treo – one that will be more focused on the information and entertainment capabilities of our beloved smartphone and not only its productivity for work.
Although Palm has made significant inroads by being squarely focused on presenting the Treo as a great business tool in the corporate market it has dedicated few resources to make our Treo an equally leading player on the media and entertainment fronts that would appeal to a wider consumer market – an opportunity that Apple will now fully exploit with its forthcoming release of the iPhone and all its cool iPhone accessories at the end of June.
For many years I have promoted the view that our Treo should be considered the best “portable digital entertainment device” (see Treo Family is Great & they do Entertainment) and I don’t know what strategic reasoning Palm has had for not wanting to play more aggressively in this space (music, movies, photo, etc.) in the past (for example with a closer partnership with Yahoo! and Rhapsody among others).
To my delight it appears that Elevation has a much clearer understanding of “Digital Convergence” (merging telecommunications, computing and entertainment) and the opportunities that it presents for a company like Palm. In a NY Times interview, Roger McNamee, a veteran technology investor and Elevation Partners co-founder, explained that the rationale for his firm’s investment “is found in the rapid innovation that is changing cellphones into computers and entertainment devices”. He added that “the hand-held computing world is still in its infancy and that designs and rapid innovation will continue to proliferate, making it impossible for several large players to dominate the market for software or hardware.”
Another rationale for the investment is the fact that Apple’s exclusive iPhone deal with AT&T may open the door for Palm to introduce a competing device to other carriers such as Sprint and Verizon in the US as well as Vodafone and Orange in Europe. Specifically, IDC analyst Randy Giusto in Business Week stated that “Palm needs a round of product upgrades that will appeal to consumers targeted by Apple’s iPhone marketing blitz while also standing up against RIM amid enterprises.”
I have to admit that I had high hopes that such a “[Treo] product upgrade” might have been what Jeff Hawkins was going to present at the “D” conference last week but instead we received the rather uninspiring Foleo… We will probably have to wait another 6 months to find out if Palm jumps on the entertainment wagon and finally releases a smartphone that can more directly compete with the iPhone.
In the meantime, I’m thrilled to see that there is finally some fresh thinking coming to Palm’s board with people that have a clearer strategic vision about the many opportunities that lie ahead as well as the product development skills to deliver a new Treo smartphone that we can all truly get excited about again.
Palm Announces Strategic Recapitalization With Elevation Partners [Palm PR]
Elevation Partners website
Palm's New Dough—and New Blood [Business Week]
Palm Investor Sees Hand-Held Free-for-All [NY Times]
Treonauts are always elevated…