“As a result of this transaction, we will strengthen the Palm leadership team and create a more effective capital structure, which puts us in a great position to attract new talent, significantly strengthen our execution capabilities, and deliver long-term shareholder value,” said Ed Colligan, Palm president and chief executive officer.

Colligan continued: “Jon Rubinstein is one of the top engineering executives in Silicon Valley, and he will lead our product-development efforts. As a significant new investor, Elevation brings onboard unique partners and relationships, plus a long investment horizon. For shareholders, the recapitalization provides an immediate return on their investments and our shareholders will retain their ability to participate in the company’s success and future growth.”

As part of the deal, Elevation appointed Jon Rubinstein, former head of the iPod division at Apple, as Palm's executive chairman. Fred Anderson, the former chief financial officer of Apple will also join the Palm board. Two long time Palm board members, former chief executive Eric Benhamou and Scott Mercer, will resign.

"This is a company with an impressive history of introducing game- changing products - it pioneered the smartphone - and I intend to help extend that legacy," said Rubinstein.

The deal marked the biggest ever investment by Elevation, which counts Anderson and U2 rock star Bono among its principal partners.

Palm is best known for the Treo line of phones, but is also credited with the first popular handheld computing device the Palm Pilot. The move comes as Palm's smartphones are facing increased pressure from competitors like RIM, Nokia and Apple itself, which is set to launch its hotly-awaited iPhone on June 29.