Private Equity Fails to Revive Palm

Not every troubled company can be rescued. As smartphone maker Palm Inc.'s (PALM) troubles go from bad to worse, it looks like Elevation Partners' June investment to buy 25% of the company may have been too little too late.

In the wake of Palm's forecast earlier this week that current quarterly results will disappoint -- partly because of lower-than-expected shipments of its low-priced Centro phone -- as of Thursday afternoon the company's shares were trading at less than $6 per share, and well below the $17.57 per share level they touched shortly after the company announced the investment from Elevation Partners along with the installation of new management.

In this post Tech Trader Daily's Eric Savitz points out that Palm's cash and cash equivalents dropped to $292 million at the end of October, less than the company's $396 million in long-term debt.

Palm's current predicament recalls the situation Lucent Technologies Inc. faced in 2006, after it had agreed to, but not yet completed, a merger with Alcatel SA. Lucent was in trouble when merger terms were struck with Alcatel SA, but the target's performance deteriorated so rapidly in the months before the deal was finalized that many analysts said Alcatel might have cause to adjust the price downward. In the end, the merger went through under the original terms, but the combined entity's soft performance since then has only given fuel to the naysayers.

See June 4 story from TheDeal.com ($)

See Dec. 19 post from Tech Trader Daily
See July 31 post from Tech Confidential