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  1. pump142's Avatar
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    Palm Is Said to Sell Stake to Equity Firm in Revamping

    By ANDREW ROSS SORKIN and JOHN MARKOFF
    Published: June 4, 2007
    Palm Inc., the struggling hand-held device company that makes the Treo, reached a deal yesterday to sell a quarter of the company to Elevation Partners, a private equity firm, for about $325 million as part of a plan to reorganize the company, according to people involved in the negotiations.

    http://www.nytimes.com/2007/06/04/te...gy&oref=slogin
    M505 -> M515 -> Kyo6035 -> Kyo 7135 -> Treo 600 ->Treo 650 -> Treo 700P -> Treo 700 WX -> Samsung Saga VZW
  2. #2  
    This is so much better than being taken over by (gulp!) Nokia.
  3. #3  
    Ouch. That was a painful read that put things in perspective.

    WMExperts: News, Reviews & Podcasts + Twitter
  4. #4  
    It doesn't actually sound all that bad. They get a capital infusion (of sorts) and some key people from Apple, including the guy that designed the iPod.

    More details in this WSJ article:
    http://online.wsj.com/article/SB1180...448-email.html

    NOTE: that link will only work for a week before it expires
  5. #5  
    And people keep saying Palm is not in trouble. Would a healthy company with great prospects sitting on a $500 million money heap and 11 profitable quarters need to do this? Most of the supposed financial success of the company is smoke and mirrors, and hide the under-investment in product development that has been endemic in Palm. Just look at how much better the 755p is vs the 700p (not!)

    Surur
  6. #6  
    Quote Originally Posted by surur View Post
    And people keep saying Palm is not in trouble. Would a healthy company with great prospects sitting on a $500 million money heap and 11 profitable quarters need to do this? Most of the supposed financial success of the company is smoke and mirrors, and hide the under-investment in product development that has been endemic in Palm. Just look at how much better the 755p is vs the 700p (not!)

    Surur
    This fall/Winter will be the final chance I will give palm with this supposed next gen Treo. If Palm still falls short on delivery, I will be jumping ship for sure. No faith, just last chance(i.e. maybe they will surprise me).
    at&t iPhone3G
  7. ttcoupe's Avatar
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    #7  
    Quote Originally Posted by surur View Post
    And people keep saying Palm is not in trouble. Would a healthy company with great prospects sitting on a $500 million money heap and 11 profitable quarters need to do this?
    You just keep bashing without thinking at all.

    Someone is paying a premium to become a Palm investor. Is it wise that the company allows this to happen and gets more money in than the stock price would merit? Yes, it is.

    In this deal, Palm actually distributes more money to shareholders than it gets from these new investors. Is this a sign of a healthy company? Yes, it is. Healthy companies can afford to pay dividends.
  8. #8  
    Quote Originally Posted by ttcoupe View Post
    You just keep bashing without thinking at all.

    Someone is paying a premium to become a Palm investor. Is it wise that the company allows this to happen and gets more money in than the stock price would merit? Yes, it is.

    In this deal, Palm actually distributes more money to shareholders than it gets from these new investors. Is this a sign of a healthy company? Yes, it is. Healthy companies can afford to pay dividends.
    If you read the article, Palm basically put the company on the block via Morgan Stanley, and none of the big boys would take a bite. The best they could do was sell a quarter of the company to venture capitalists. Just because they bought it does not mean its a good deal, and in fact the dividend they pay out will come out of debt taken on by the company.

    This deal looks a lot more like an LBO than an investment.

    Surur
  9. ttcoupe's Avatar
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    #9  
    Quote Originally Posted by surur View Post
    If you read the article, Palm basically put the company on the block via Morgan Stanley, and none of the big boys would take a bite. The best they could do was sell a quarter of the company to venture capitalists. Just because they bought it does not mean its a good deal, and in fact the dividend they pay out will come out of debt taken on by the company.

    This deal looks a lot more like an LBO than an investment.
    See it this way: first they hand out $9 per share to the existing shareholders. Market capitalization of Palm decreases significantly at this phase. Palm does not have quite this much of cash so they must take debt.

    Next new shares are issued to these new investors. The premium they pay at this point is over 30%. Counted from current market cap, it is about 15%.

    Done this way, the new investors can grab a relatively large part of Palm (which they want) and not use large amounts of money. And don't read that sentence in the wrong way, the deal is great for current Palm investors.
  10. #10  
    But what does it say about the company to its customers? Does it inspire confidence in their strategy and unique resources when none of the big boys want to buy them? Dell, Apple, HP, Moto and Nokia were all rumoured to be suitors, but none wanted to buy the company.

    Now that the third business is out in the open (and being slated), and take over rumours are also disappointingly done for, the stock price is likely to tank back to 13-14.

    Surur
  11. ttcoupe's Avatar
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    #11  
    Quote Originally Posted by surur View Post
    But what does it say about the company to its customers? Does it inspire confidence in their strategy and unique resources when none of the big boys want to buy them? Dell, Apple, HP, Moto and Nokia were all rumoured to be suitors, but none wanted to buy the company.

    Now that the third business is out in the open (and being slated), and take over rumours are also disappointingly done for, the stock price is likely to tank back to 13-14.
    As I said, these new investors will pay a premium relative to the current share price.

    Your ridiculous claim of $13-$14 means that the value of Palm share after the $9 dividend is $4-$5. The new investors are paying about twice that amount.

    So clearly, you have no idea what you are talking about. You just bash Palm, in every possible occasion.
    Last edited by ttcoupe; 06/04/2007 at 05:26 AM.
  12. #12  
    Quote Originally Posted by surur View Post
    And people keep saying Palm is not in trouble. Would a healthy company with great prospects sitting on a $500 million money heap and 11 profitable quarters need to do this? Most of the supposed financial success of the company is smoke and mirrors, and hide the under-investment in product development that has been endemic in Palm. Just look at how much better the 755p is vs the 700p (not!)

    Surur
    Surur,
    This transaction is not a sign that the company was in financial trouble. It actually means the opposite - that the Board was way too conservative. The new investors believe that they can generate better returns for shareholders by getting rid of its cash pile.
  13. #13  
    Quote Originally Posted by samkim View Post
    Surur,
    This transaction is not a sign that the company was in financial trouble. It actually means the opposite - that the Board was way too conservative. The new investors believe that they can generate better returns for shareholders by getting rid of its cash pile.
    Which is the essence of a LBO, isn't it? They buy a company with its own debt, and pay themselves from its assets. Next try trim fat, by canceling redundant products and firing R&D staff.

    They make money for a few quarters and then leave a dying husk of a company behind. Nice living if you can get it.

    Surur
  14. #14  
    Quote Originally Posted by surur View Post
    Which is the essence of a LBO, isn't it? They buy a company with its own debt, and pay themselves from its assets. Next try trim fat, by canceling redundant products and firing R&D staff.

    They make money for a few quarters and then leave a dying husk of a company behind. Nice living if you can get it.

    Surur
    Kinda. LBOs involve buying an entire company with an equity investment along with a significant amount of debt. Not all LBOs involve slashing costs, though most do. I haven't studied Palm's financials closely enough to say for sure, but I would guess that cost cutting would not be the main focus for the investors.
  15. ttcoupe's Avatar
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    #15  
    Quote Originally Posted by surur View Post
    Which is the essence of a LBO, isn't it? They buy a company with its own debt, and pay themselves from its assets.
    This case is quite the opposite. The new investors will not get the $9 cash handout. Do your homework.
  16. #16  
    I would look at this more as an acquisition/merger than Palm being acquired. The new blood only has a minority share and the bulk of Palm's existing management is staying on board. Basically, Palm restructures its balance sheet, probably lowering its capital costs and brings in a new top engineer type person. In general, I'd view it as a positive, plus the existing shareholders get a $9 dividend, not too shabby.

    Gargoyle
  17. #17  
    can you guys tell me who will receive the $9 dividend? all current shareholders? is it too late to buy now?

    thanks.
    Treo 750 unbranded T-mobile, HTC WIZARD 8125 T-MOBILE (broken), Treo 650 T-mobile 1.43/1.14 OS 5.4.8 Garnet (sold).
    Dell X50v, X30 624Mhz and HP ipaq h2210 h1945.

    Treo 750 hacks thread.
  18. #18  
    I don't understand product loyalty anymore these days. I just go to whichever company provides me with what I want/need. I switched to the Treo 750 b/c I wanted a WM5 PPC in the Treo form factor, but if Palm doesn't get on the ball and release thinner devices with more powerful features (i.e. GPS) then I won't even bother upgrading to a new device just because.

    I suppose there is a difference with diehard POS fans due to the fact that only Palm manufactures devices running POS.
  19. #19  
    can you guys tell me who will receive the $9 dividend? all current shareholders? is it too late to buy now?

    thanks.
    If it's trading in the $17 range, that includes the dividend. If it's trading in the $8 range, that excludes the dividend. The deal is subject to approvals, so the dividend won't happen for a while. When it does, the price will drop around $9 overnight.
  20. #20  
    Quote Originally Posted by gadgetluva View Post
    I don't understand product loyalty anymore these days. I just go to whichever company provides me with what I want/need. I switched to the Treo 750 b/c I wanted a WM5 PPC in the Treo form factor, but if Palm doesn't get on the ball and release thinner devices with more powerful features (i.e. GPS) then I won't even bother upgrading to a new device just because.
    Agreed 1000%!!!

    I suppose there is a difference with diehard POS fans due to the fact that only Palm manufactures devices running POS.
    Come, on give the die-hard POS fans a break. They haven't had much to cheer about for years now.
    PDA Lineage: Handspring Visor Deluxe, Visor Prism, Casio EM-500, Casio E-200, HP Jornada 568, IPAQ 1910,IPAQ 4150,Ipaq 2750 (with Moto Razr V3), Imate K-Jam,Treo 750,HTC Touch Cruise,HTC Touch Diamond(US)
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