Palm mulls $2 billion buyout deal

US hand-held device maker Palm is reportedly close to a $2 billion sale, with buyout firms TPG and Silver Lake among the favourites to buy the business.

The $2 billion (€1.5 billion) sale of Palm, a US hand-held device maker, could reportedly be sealed as early as Thursday, with buyout firms TPG and Silver Lake Partners currently seen as the preferred bidders ahead of mobile phone giants Nokia and Motorola.

The company’s advisors Morgan Stanley are keen to complete a sale before the company reports its third quarter results on Thursday, according to industry blog Unstrung.com.

The site said private equity firms TPG and Silver Lake and mobile phone giants Nokia and Motorola have all emerged as serious bidders. “Nokia is seen as the leading vendor bidder; while Palm’s management is said to prefer a private equity buyer,” it reported.

All parties have declined to comment on the speculation.
 
Todd Kort, an analyst with market research firm Gartner, told The San Jose Mercury News that Palm’s user base has declined, while the company’s handheld Treo device has become less competitive because of its price. Kort said: “It’s a real tough position to be in. I’m going to be surprised if anyone coughs up a couple billion for them.”

Since its foundation in 1999, Silicon Valley-based Silver Lake has distinguished itself as one of the largest, most active private equity players in the technology buyout sector. The firm, which is currently investing a $3.6 billion fund, has been involved in the buyouts of many mature technology companies, notably its $11.3 billion acquisition of SunGuard Data Systems and its $875 million deal alongside TPG for disk-drive maker Seagate Technology. Silver Lake is currently raising its third fund, with a reported target of $10 billion.

TPG also has extensive experience within technology buyouts, and mobile phone companies in particular. It recently made a 4.5 times return on its investment in Greek mobile phone operator TIM Hellas, which was sold for €3.4 billion ($4.5 billion), while in 2005, the firm acquired a majority stake in German phone operator MobilCom for €265 million. TPG closed its fifth fund at $15 billion in November.