A private equity firm Elevation Partners agreed to boost its investment in the struggling smartphone maker by $100 million, sending its shares surging 24 percent in Nasdaq trading after the announcement was made public. The capital infusion into Palm Inc , the maker of the Centro and Treo smartphones, gears up for the much-anticipated launch of a new device and operating systemnext 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. Share prices of Apple (AAPL) and Palm (PALM) lost about 50 per cent of its value this year.
“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.
Palm may introduce the new Nova software at the Consumer Electronics Show next month in Las Vegas, said Faucette, who is in Portland, Oregon. Colligan said last week that handsets with the new software will be available in the first half of 2009.
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