Palm distances itself from investor's boasting
Elevation Partners' Roger McNamee is a smart man, but his comments regarding Palm's Pre smartphone have forced the company to disavow its lead investor.
Roger McNamee is about to learn that nothing can ever be withdrawn from the Internet.
In an SEC filing for the ages, Palm attempted to do just that on Monday, distancing itself from comments made by Elevation Partners' McNamee--Palm's primary investor--regarding Palm's Pre smartphone and Apple's iPhone. Palm is expected to launch the Pre at some point before the end of the first half of the year, and while the company's financial backer is understandably excited, he seemed to lose all sense of perspective during an interview with Bloomberg last week.
In the interview, McNamee declared, "You know the beautiful thing: June 29, 2009, is the two-year anniversary of the first shipment of the iPhone. Not one of those people will still be using an iPhone a month later." In other words, every single last one of those original iPhone owners is going to drop their iPhone, leave AT&T, and sign up with Palm and Sprint, even though they have no idea what the Pre is going to cost. That's usually an important consideration in a buying decision.
Salesmen are prone to hyperbole, of course. But the timing of McNamee's comments created problems for Palm, since the company was about to launch a stock offering to raise money to finance the actual launch of the Pre, currently starring in late-night television infomercials. McNamee's comments could conceivably be interpreted as a sales prediction, which could entice someone to purchase Palm's stock only to be disappointed and possibly litigious when Palm fails to put Apple's iPhone division out of business in July.
So Palm had to file a lengthy "free writing prospectus" with the Securities and Exchange Commission, clarifying or withdrawing 10 references made during McNamee's interview. For example, Palm called McNamee's iPhone reference "an exaggerated prediction of consumer behavior pattern."
Other highlights:
• "With respect to the statements in the second to last paragraph of the article that 'the underlying technology for Research In Motion Ltd.'s BlackBerry is about 13 years old, while the technology behind the iPhone goes back almost nine years,' estimating one specific age for the many technology components underlying any mobile phone is inherently imprecise and these statements are withdrawn."
• "With respect to the implications in the second to last and last paragraphs of the article that Palm's new operating system will give it an edge over competitors that 'are going to run out of gas way before' Palm, estimations of the relative useful lifespan of smartphone operating systems are conjecture, unverifiable at this time, and age is not necessarily predictive of their relative long-term success."
The stock offering worked out for Palm, raising $83.9 million that should keep the lights on for another few months. The Pre does indeed look like one of the first smartphones released since the iPhone capable of eroding the buzz around Apple in the mobile market, but Palm has to launch it first.
And just as Apple CEO Steve Jobs' prediction that the company would sell 10 million iPhones by the end of 2008 would have been quite embarrassing had Apple not reached that goal, McNamee's words could still come back to haunt Palm and Elevation Partners if the Pre isn't a success.