Palm to add former Apple CFO, iPod head to board

PDA and smartphone maker Palm on Monday announced a recapitalization plan that will plant two former Apple executives on the company’s board of directors and will infuse $325 million in funds into the company. In return, Palm’s selling a 25 percent stake to Elevation.

Palm’s new partner in this endeavor is Elevation Partners, a private equity firm led by Apple’s former Chief Financial Officer, Fred Anderson, and Roger McNamee. U2 frontman Bono is also one of the firm’s partners. Both Anderson and McNamee will join Palm’s board of directors following the closing of the transaction, replacing former CEO Eric Benhamou and D. Scott Mercer, who will resign at that point.

Perhaps more significantly, however, Palm plans to appoint Jon Rubinstein, Apple’s former senior vice president of hardware engineering and head of its iPod division, as executive chairman of the board. Palm president and CEO Ed Colligan said that Rubinstein will lead the company’s product development efforts going forward.

Rubinstein left Apple in 2006. He’s credited as instrumental in creating both the iPod and the iMac, and became head of Apple’s iPod division when it was spun off as a separate business unit in 2004.

Anderson was Apple’s executive vice president and CFO from 1996 to 2004. Recently Anderson accused Steve Jobs of telling him to backdate stock options granted to Jobs by Apple; the U.S. Securities and Exchange Commission reached a settlement with Anderson and charged for Apple general counsel Nancy Heinen. Anderson paid $3.5 million in fines without admitting wrongdoing. Anderson also sits on the boards of eBay and Move.

Palm has had its share of challenges over the past several years as the company has tried to remold itself into a manufacturer of “smartphone” devices in the face of an onslaught of challengers such as BlackBerry maker Research In Motion, Windows Mobile licensees, and, at the end of the month, Apple.

Following the divestiture of Palm and Palmsource, developers of the Palm OS, Palm has created Treo smartphones that use the Windows Mobile operating system while continuing to work on Palm OS-based devices. Palmsource itself has been acquired by a Chinese mobile operating system developer with an emphasis on adapting Linux to work in the mobile space.

Last week Palm co-founder Jeff Hawkins introduced the Foleo, a new “mobile companion” — a lightweight laptop-type device that works in conjunction with smartphones like Palm’s own Treo line, offering a full-sized keyboard, larger screen, built-in Wi-Fi and Bluetooth connectivity to the smartphone, while eschewing a hard drive of its own or other amenities that would raise the price and increase size and weight. The product introduction has been tepidly received, however: Many high-tech pundits and analysts suggests the Foleo is a solution in search of a problem.

Analysts have been suggesting for months that Palm was courting potential financial partners. Nokia, Motorola, and private equity firms have all been cited as potential partners.

Elevation Partners plans to invest $325 million in Palm; the company plans to use that along with existing cast and $400 million in new debt to finance a cash distribution of $9 per share to existing Palm shareholders.

Palm stock was trading at 17.55, up 1.46 or 9.07 percent, ahead of the bell on Monday morning.

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