Smart-phone maker Palm Inc. said on Monday it will sell a 25 percent stake to private equity firm Elevation Partners for $325 million in a deal that brings in a former senior Apple Inc. executive as chairman.
Palm shares climbed 8.5 percent as investors hoped the cash infusion and the appointment of Jon Rubinstein, formerly senior vice president and general manager of Apple's iPod unit, as executive chairman will revive the Palm brand and perhaps develop a relationship with Apple.
Rubinstein's "role will be in strengthening and fine tuning our products engine," Palm Chief Executive Ed Colligan said on a conference call. "This is about allowing us to put a team in place to enable us to capture a leadership position."
"While Palm has numerous near-term challenges, we are upgrading Palm shares ... in view of Palm's announcement that a private equity involvement by former Apple executives, as well as a valuation of around $17.50 (a share) for the Elevation Partners stake," Bear Stearns analyst Andy Neff said in a note to clients.
Neff raised his rating to "peer perform" from "underperform," adding that he expects alliance talks between Palm and Apple to emerge.
Elevation co-founders Fred Anderson, Apple's former chief financial officer, and Roger McNamee will join Palm's board, replacing Palm Chairman Eric Benhamou and director D. Scott Mercer, who will both resign once the deal closes.