Palm says “Achtung Baby” to Bono’s big bet

March 21, 2010

Elevation Partners has poured money into a few concentrated bets but is struggling to find what it’s looking for — profits. The fund where Bono, the frontman of rock band U2, is a co-founder is now seeing its biggest gamble, the turnaround of handset maker Palm, starting to unravel.

Palm’s stock plunged by a quarter by early afternoon on Friday following the company’s earnings announcement. The main bombshell was that while Palm shipped 960,000 phones in the quarter ending Feb. 28, it only actually sold about 40 percent as many.

Elevation’s fate rides largely on Palm, in which it has sunk $460 million. The investment firm has managed to double its $300 million investment in video game maker BioWare/Pandemic. But its other investments have given few signs they can outweigh any failure to deliver on Palm.

The firm bought 40 percent of Forbes’ publishing business from the Forbes family in 2006, paying around $275 million according to news reports at the time. Since then, valuations of media rivals have melted down. If October’s sale of Business Week for $9 million is anything to go by, Elevation’s stake is hurting. And a $100 million investment in Move, an online realty services company, doesn’t look spectacular, either.

So the prospects for the Palm investment are crucial. Happily for Elevation, the combination of preferred stock, common stock and warrants it bought has protected it somewhat from Palm’s troubles — the holding is roughly breaking even so far. But if the firm’s phones don’t sell better in the next few quarters, the company’s cash burn could accelerate, and Elevation’s investment could head south.

Palm thinks adding a new cellphone operator partner — perhaps AT&T — could help, as might ironing out problems with Verizon, an existing partner. And its impressive smartphone operating system could yet attract new customers.
There are other options, too. Palm could license out its software, or even sell itself to a rival with more resources. But smartphone competition is harsh and intensifying. Apple, Research in Motion, Nokia, Google and Microsoft are all backing differing operating systems. There’s still tomorrow for Palm. But time is running short.

Comments

I’m feeling a measure of quiet satisfaction that Bono, a shameless self-promoter/global do-gooder/over-rated rock star/perennial winner of the Richard Cranium award just can’t seem to do his sums. Maybe there is some justice after all.

Posted by Gotthardbahn | Report as abusive
 

oh thats mean. he rocks. got famous to a point where he couldnt move without being followed. how else would someone turn that around?-for the good of others? i could only wonder why he would start a fund though, prolly to help others. he is not different than anyone else who lost money in the market, which is pretty much a majority of the world anyway. I think he should stay away from business enterprises and get stronger so he could take world leaders by the ankles and shake them upside-down to get money for the needy.

Posted by Zack_Mercado | Report as abusive
 

If anyone deserves the spoils of business success it is Bono and all of the members of U2. I know of know one person who has done more for the most desperate around the world than Bono and the members of U2. Bono has always demonstrated a truly profound sense of humility in and out of the public eye. The answer to the issues at Palm can be found in the very space that these men know and navigate better than anyone on the planet. This space is the public consumer on a global scale, their success in this arena is unmatched by any other artist ever! Bono and the boys are the ponies I am betting on. I hope I get to meet them all one day, what an honor indeed!

Posted by FerrariPilota | Report as abusive
 

Gotthardbahn: I could not have put it better. Maybe Britney Spear’s fund can bail them out.

Posted by Ghandiolfini | Report as abusive
 

Palm should have sold itself 5 years ago

Posted by Story_Burn | Report as abusive
 

Looks like Palm’s going to where the streets have no name.

Posted by GLK | Report as abusive
 

This just goes to show that Bono will do anything to gain Wall Street approval.

Anything.

Posted by HBC | Report as abusive
 

Maybe we should tell him about the de Bono hats.

Posted by Ghandiolfini | Report as abusive
 

This business transaction is without question the largest-ever public display of masturbation on every delicious level. Couldn’t just one brave soul within the Elevation Organization, U2 touring personnel, etc. (read: ANYONE) at any time, (pre- or post-transaction) appreciate and share aloud (quite simply)… PALM?

Posted by had2callit | Report as abusive
 

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