Palm raises $83.9 million; Finds balm for cash burn

Palm raises $83.9 million; Finds balm for cash burn

Summary: Palm has raised $83.9 million courtesy of a public offering of 23.

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Palm has raised $83.9 million courtesy of a public offering of 23.12 million shares at $6 each. With the move Palm has almost replaced the cash it burned in its fourth quarter.

The company said Monday that it was aiming to raise $49 million, but the offering was oversubcribed allowing Palm to raise more money. The initial $49 million offering consisted of 18.5 million preferred stock and warrants acquired by Elevation Partners in January. 

Optimism about the Pres prospects have enabled Palm to replenish its cash.

Optimism about the Pre's prospects have enabled Palm to replenish its cash.

Palm's $49 million capital raise would have been a big help, but the $83.9 million tally is significant for the company. Why? As demand fell off a cliff last quarter ahead of the launch of the Pre, Palm burned through $95 million to $100 million. With the cash it raised, Palm has almost patched that hole in its pocket. 

In a statement, Palm said it will "use the proceeds to strengthen its working capital position and to further bolster the resources it is devoting to the launch of the Palm Pre and future product-development efforts."

Palm isn't completely out of danger, but the Pre has enough buzz to allow the company to raise cash via public offerings. With one more quarter of pain before the Pre makes a difference, Palm may need to raise more cash down the road.

Topics: Enterprise Software, Banking, CXO, Mobility

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3 comments
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  • Bet the farm...

    Palm seems to have bet the farm on the success
    of the Pre. They seemed to have a compelling
    product based on the demo. But... they also
    have a few strikes against them.

    1. Investing in a Palm device / ecosystem would
    seem risky given their financial situation.

    2. Betting the farm on an exclusive Sprint deal
    is questionable.

    3. Third party web based apps? We all saw how
    (un)popular that was when they rolled out the
    iPhone.

    4. It may end up being better than something
    like Windows Mobile, but I think the bar for
    (re)entry into this market has been set a bit
    higher. Palm basically just jettisoned their
    existing customers by making all previous
    products obsolete. For a company with limited
    resources, I understand why this was necessary,
    but this doesn't go over well with business
    types or many who were previously loyal to
    Palm.

    5. With 25,000+ apps, the iPhone has lots of
    momentum. Blackberry has a good hold on
    business markets.

    6. We need to realize that the Palm won't be
    competing with existing products. Rather, Palm
    will be competing with newer products from
    other vendors such as a 3rd generation iPhone,
    etc. As we've seen, a lot can happen in a
    year.
    techconc
  • RE: Palm raises $83.9 million; Finds balm for cash burn

    Palm's products were successful for years despite Palm's dismal customer service/tech support But the Pre strikes me as too little to late. Especially with the incompatibility with their existing products (and the now-defunct handheld line).

    Going to a single, second-tier, carrier (Sprint) puts them head-to-head with BlackBerry 3G service (VZW & ATT) and with Apple 3G service (ATT). Had they chosen ATT ad VZW as carriers, they might have had less capital as a result but their potential market share would have been considerably larger.

    Palm is dead and I don't think that the Pre can resurrect it.
    M Wagner
  • They can make it right in one stroke

    All they have to do is announce and release an OS5 emulator.
    Geedavey