Monday, June 4, 2007

Other shoe dropped at Palm

After Palm’s less than impressive debut of the Foleo, I wondered what was next.

This morning brought news of the $325 million sale of 25% of the company to a bottom-fishing private equity firm, Elevation Partners. The investment firm is best known as the $2b fund with rock star Bono as one of five partners.

The best news for Palm, however, is that Jon Rubinstein will become executive chairman. Even better news is that he takes the board seat long held by 3Com chairman Eric Benhamou (a networking guy who was co-founder of one of 3Com’s predecessor companies).

[Jon Rubinstein]Rubinstein has been (somewhat misleadingly) described as an ex-Apple executive and the iPod Pioneer. Instead, he was the Nextie who as Steve Jobs’ right hand man for hardware (as Avi Tevanian was for software) was part of the management team imposed upon Apple as part of the NeXT acquisition of Apple.

Rubinstein was certainly capable, disciplined and worked well as part of Jobs’ team. My one personal interaction with him was at an Apple party (ca. Jan. 1998) arguing for a subnotebook successor to the Duo and 2400 series laptops. His answer was: it’s a niche outside Japan, and our small run rates don’t justify making one. (Ironically, today many Mac owner are holding off buying their next laptop, waiting for Apple to ship its first subnotebook in a decade, rumored to be due in late 2007 or early 2008).

However, it’s hard to measure Rubinstein’s contribution to Apple’s success. The Jobs II management model seems to be that low-level contributors and managers (such as Tony Fadell for the iPod) champion an idea, middle managers help vet and prepare the ideas for a Jobs interrogation, and then Steve makes all the final decisions. Still, Rubinstein was part of a spectacularly successful team, and Palm could use more product success right about now.

Rubinstein will be joined on the board by Fred Anderson, who as Apple CFO from 1996-2004 shepherded the company through its darkest hours. Anderson’s star has been tarnished by his association with Apple’s problems backdating stock options, but from my 2002 study of Apple’s turnaround, it was clear he was the fiscal and operational sanity that the company needed across three CEOs.

Twenty years ago (back when MTV was on free cable), Sir Paul David Hewson famously sang “I still haven’t found what I’m looking for.” Let’s hope that Palm employees, users and shareholders won’t say that in 6 months about Bono’s investment and the management team that he brings to Palm.

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