Palm Said to Tap Goldman, Quattrone to Find Buyers
Palm Inc., creator of the Pre smartphone, is seeking bids for the company as early as this week, according to three people familiar with the situation.
The company is working with Goldman Sachs Group Inc. and Frank Quattrone’s Qatalyst Partners to find a buyer, said the people, who declined to be identified because a sale hasn’t been announced. Taiwan’s HTC Corp. and China’s Lenovo Group Ltd. have looked at the company and may make offers, said the people.
Palm, which helped pioneer the market for personal digital assistants, would offer suitors the WebOS software that competes against mobile operating systems from iPhone maker Apple Inc. and Google Inc. For Elevation Partners LP, the firm that owns about 30 percent of Palm, a sale may end the volatility associated with a stock that surged more than 10-fold since December 2008 before erasing most of the gain.
“Palm still has quite a good brand in the U.S. market, and some strong technology, so you can do something with it,” said Frank He, a technology analyst at BOC International Holdings Ltd. in Hong Kong. “The shares have gone down a lot and the company may become attractive to anyone looking for a turnaround play.”
The Sunnyvale, California-based device maker surged 32 percent last week on the Nasdaq Stock Market on renewed speculation of a takeover bid. Before the rally, the stock had plunged more than 60 percent this year, dragged down by disappointing sales of the Pre and Pixi phones.
Missing Estimates
Palm rose 89 cents, or 17 percent, to $6.05 at 12:12 p.m. New York time in Nasdaq Stock Market trading.
Chief Financial Officer Doug Jeffries last month forecast sales in the quarter ending in May will be less than $150 million, compared with the $300 million average of analysts’ estimates compiled by Bloomberg at the time.
Palm, which had a market value of $870.8 million before today, ranked sixth in the North American smartphone market during the three months ended Dec. 31 with a 4.3 percent share, according to Gartner Inc. Research In Motion Ltd., maker of the BlackBerry, led with 44 percent, followed by Apple’s 24 percent, according to the Stamford, Connecticut-based research company.
Chief Executive Officer Jon Rubinstein, who developed Palm’s latest operating system, was counting on the Pre and Pixi smartphones to attract customers. The company has patents from mobile hardware to software and power-saving technologies.
Lenovo, Dell
Lynn Fox, a Palm spokeswoman, declined to comment, as did Goldman’s Andrea Rachman. Qatalyst’s Sally Palmer didn’t immediately respond to requests for comment. Chen Hui-Ming, the chief financial officer of HTC, declined to confirm or deny the company’s interest in Palm.
Wong Wai Ming, Lenovo’s chief financial officer, also declined to comment on the company’s acquisition plans. In January, Lenovo paid $200 million to purchase Lenovo Mobile Communication Technology Ltd., letting it re-enter the market for handsets. The company had sold the mobile-phone unit in 2008 to focus on personal computers.
Palm shares have been buoyed in the past on speculation the company would be bought by Nokia Oyj. The Finnish company today declined to say whether it might be interested.
“We never speculate or comment on market rumors,” said Arja Suominen, a Nokia spokeswoman.
Dell Inc. looked at Palm, though it decided against an offer, according to two of the people familiar with the matter. Jess Blackburn, a spokesman for the Round Rock, Texas-based computer maker, didn’t respond to a call for comment.
Burning Cash
Unlisted Huawei Technologies Co. and ZTE Corp., China’s two biggest makers of phone equipment, may also bid for Palm, said Lu Chia-lin, a technology analyst at Macquarie Group Ltd. in Taipei.
Chinese companies “have been quite eager to expand their international markets,” said Lu. Ross Gan, a spokesman at Huawei, said the company is always open to opportunities, though he declined to comment on speculation about mergers and acquisitions as a matter of policy. Margrete Ma, a ZTE spokeswoman, couldn’t immediately be reached for comment.
Palm may burn $80 million every three months for the next five quarters as competition in the smartphone market intensifies, Berenberg Bank analysts including Adnaan Ahmad wrote in a March 25 report. The company held $592 million in cash and short-term investments at the end of its fiscal third- quarter, according to the report.
Market Pioneer
In the U.S. computer industry, there were 133 acquisitions announced in the past 12 months with an average premium of 56 percent, including net debt, according to Bloomberg data. That average, along with Palm’s enterprise value of $962 million before today, suggests that Palm may fetch $1.6 billion.
After Palm introduced the Pre at the Consumer Electronics Show in January 2009, the stock jumped 80 percent in two days to $5.96. By September, the shares had climbed as high as $17.46.
The stock then dropped 79 percent over the next six months as Palm’s sales growth was outpaced by marketing costs, and the company lost market share to Apple and phones equipped with Google’s Android. Palm has posted 11 straight quarterly losses.
Founded in 1992, Palm helped pioneer the market for handheld organizers with its PalmPilot devices. The company was acquired by U.S. Robotics, which was in turn purchased by 3Com Corp. 3Com spun off Palm in 2000.
Rubinstein joined the company after leading development of Apple’s best-selling iPod media player. He was recruited to Palm by Fred Anderson, Apple’s former finance chief and a co-founder of Elevation Partners.
The Pre was Palm’s first phone based on WebOS. It went on sale in June 2009, followed by the smaller, cheaper Pixi in November. The phones let users send e-mail, surf the Web, stream video and run multiple applications at the same time.
Both devices were sold in the U.S. exclusively by Sprint Nextel Corp., the country’s third-largest carrier, until Verizon Wireless began offering enhanced versions in January.
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The company is working with Goldman Sachs Group Inc. and Frank Quattrone’s Qatalyst Partners to find a buyer, said the people, who declined to be identified because a sale hasn’t been announced. Taiwan’s HTC Corp. and China’s Lenovo Group Ltd. have looked at the company and may make offers, said the people.
Palm, which helped pioneer the market for personal digital assistants, would offer suitors the WebOS software that competes against mobile operating systems from iPhone maker Apple Inc. and Google Inc. For Elevation Partners LP, the firm that owns about 30 percent of Palm, a sale may end the volatility associated with a stock that surged more than 10-fold since December 2008 before erasing most of the gain.
“Palm still has quite a good brand in the U.S. market, and some strong technology, so you can do something with it,” said Frank He, a technology analyst at BOC International Holdings Ltd. in Hong Kong. “The shares have gone down a lot and the company may become attractive to anyone looking for a turnaround play.”
The Sunnyvale, California-based device maker surged 32 percent last week on the Nasdaq Stock Market on renewed speculation of a takeover bid. Before the rally, the stock had plunged more than 60 percent this year, dragged down by disappointing sales of the Pre and Pixi phones.
Missing Estimates
Palm rose 89 cents, or 17 percent, to $6.05 at 12:12 p.m. New York time in Nasdaq Stock Market trading.
Chief Financial Officer Doug Jeffries last month forecast sales in the quarter ending in May will be less than $150 million, compared with the $300 million average of analysts’ estimates compiled by Bloomberg at the time.
Palm, which had a market value of $870.8 million before today, ranked sixth in the North American smartphone market during the three months ended Dec. 31 with a 4.3 percent share, according to Gartner Inc. Research In Motion Ltd., maker of the BlackBerry, led with 44 percent, followed by Apple’s 24 percent, according to the Stamford, Connecticut-based research company.
Chief Executive Officer Jon Rubinstein, who developed Palm’s latest operating system, was counting on the Pre and Pixi smartphones to attract customers. The company has patents from mobile hardware to software and power-saving technologies.
Lenovo, Dell
Lynn Fox, a Palm spokeswoman, declined to comment, as did Goldman’s Andrea Rachman. Qatalyst’s Sally Palmer didn’t immediately respond to requests for comment. Chen Hui-Ming, the chief financial officer of HTC, declined to confirm or deny the company’s interest in Palm.
Wong Wai Ming, Lenovo’s chief financial officer, also declined to comment on the company’s acquisition plans. In January, Lenovo paid $200 million to purchase Lenovo Mobile Communication Technology Ltd., letting it re-enter the market for handsets. The company had sold the mobile-phone unit in 2008 to focus on personal computers.
Palm shares have been buoyed in the past on speculation the company would be bought by Nokia Oyj. The Finnish company today declined to say whether it might be interested.
“We never speculate or comment on market rumors,” said Arja Suominen, a Nokia spokeswoman.
Dell Inc. looked at Palm, though it decided against an offer, according to two of the people familiar with the matter. Jess Blackburn, a spokesman for the Round Rock, Texas-based computer maker, didn’t respond to a call for comment.
Burning Cash
Unlisted Huawei Technologies Co. and ZTE Corp., China’s two biggest makers of phone equipment, may also bid for Palm, said Lu Chia-lin, a technology analyst at Macquarie Group Ltd. in Taipei.
Chinese companies “have been quite eager to expand their international markets,” said Lu. Ross Gan, a spokesman at Huawei, said the company is always open to opportunities, though he declined to comment on speculation about mergers and acquisitions as a matter of policy. Margrete Ma, a ZTE spokeswoman, couldn’t immediately be reached for comment.
Palm may burn $80 million every three months for the next five quarters as competition in the smartphone market intensifies, Berenberg Bank analysts including Adnaan Ahmad wrote in a March 25 report. The company held $592 million in cash and short-term investments at the end of its fiscal third- quarter, according to the report.
Market Pioneer
In the U.S. computer industry, there were 133 acquisitions announced in the past 12 months with an average premium of 56 percent, including net debt, according to Bloomberg data. That average, along with Palm’s enterprise value of $962 million before today, suggests that Palm may fetch $1.6 billion.
After Palm introduced the Pre at the Consumer Electronics Show in January 2009, the stock jumped 80 percent in two days to $5.96. By September, the shares had climbed as high as $17.46.
The stock then dropped 79 percent over the next six months as Palm’s sales growth was outpaced by marketing costs, and the company lost market share to Apple and phones equipped with Google’s Android. Palm has posted 11 straight quarterly losses.
Founded in 1992, Palm helped pioneer the market for handheld organizers with its PalmPilot devices. The company was acquired by U.S. Robotics, which was in turn purchased by 3Com Corp. 3Com spun off Palm in 2000.
Rubinstein joined the company after leading development of Apple’s best-selling iPod media player. He was recruited to Palm by Fred Anderson, Apple’s former finance chief and a co-founder of Elevation Partners.
The Pre was Palm’s first phone based on WebOS. It went on sale in June 2009, followed by the smaller, cheaper Pixi in November. The phones let users send e-mail, surf the Web, stream video and run multiple applications at the same time.
Both devices were sold in the U.S. exclusively by Sprint Nextel Corp., the country’s third-largest carrier, until Verizon Wireless began offering enhanced versions in January.
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