Elevation Partners Invests $100 Million in Palm

(Reuters) – Palm Inc said on Monday that private equity firm Elevation Partners agreed to boost its investment in the struggling smartphone maker by $100 million, sending its shares surging 24 percent.

The capital infusion comes as Palm, the maker of the Centro and Treo smartphones, gears up for the much-anticipated launch of a new device and operating system next year.

The company has been steadily losing market share to rivals Research in Motion Ltd, the maker of the BlackBerry, and iPhone maker Apple Inc.

Last week, Palm reported smartphone revenue fell 39 percent in its fiscal second quarter.

“The additional capital from Elevation Partners will enable us to put added momentum behind the new product introductions scheduled for 2009, and will provide us with enhanced stability in unsettled economic times,” said Ed Colligan, Palm’s chief executive, in a statement.

Elevation will acquire newly issued Series C preferred stock, which is convertible into Palm common at a price of $3.25 per share, a 31 percent premium to the closing price last Friday.

Elevation will also receive warrants to acquire 7 million shares of Palm common at the same price.

In addition, Palm said it may have Elevation sell up to $49 million of the new stake to other investors on the same or better terms by March 31.

Some analysts have been urging Palm to raise additional capital. Elevation bought a 25 percent stake in the company last year for $325 million.

Sunnyvale, California-based Palm’s shares have fallen around 50 percent this year.

On Monday, the stock rose 59 cents to $3.08 on Nasdaq.

(Reporting by Gabriel Madway; editing by Jeffrey Benkoe)

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