Case : Palm Computing Inc. 1995: Financing Challenges.

Questions :

Why did Palm computing's first product fail?

Why should someone finance Palm Computing?

Which financing option should Palm Computing choose? What is their cash requirement?

Palm Computing, Inc. 1995: Financing Challenges Donna Dubinsky paced the floor of her Los Altos, California office, talking quickly and pausing only when Jeff Hawkins interjected a comment. They were reviewing the top secret meeting they had held the day before with Jon Zakin of Chicago-based U.S. Robotics (USR). Dubinsky and Hawkins did not yet want anyone to know they were even considering a USR purchase of Palm, so the two of them, along with Ed Colligan, Palm's Vice President of Marketing, met Zakin near the airport and listened to what he had to say about USR. They were surprised by how quickly talks with USR had escalated from a simple equity investment to outright purchase. Only a week before, Dubinsky and Hawkins had met Zakin for dinner at the Fish Market and what began as a low key discussion about a possible USR investment in Palm led to his proposal that USR acquire Palm. Dubinsky wanted to get Hawkins' thoughts on Zakin's offer as soon as possible. Though she was the president and CEO of Palm Computing, any business decision of this magnitude would be made only after the two had fully discussed and agreed upon the final direction. Hawkins was, after all, the company's founder, chairman, chief technology officer, and major shareholder, as well as a trusted friend. USR's proposal was only one of several financing offers that they would be considering and each of the options came with its own unique risks and rewards. Dubinsky moved to the white board on the office wall and began marking off columns. Hawkins leaned back in his chair as she scrawled Objectives along the left hand side and began filling in brief notes, dates, and dollar amounts. Across the top, she added Venture Capital, Alpha Computers?, USR, and Other. In spite of the fact that the last 15 months of searching for capital had been exhausting, Dubinsky was exhilarated on that late August afternoon in 1995. She knew, without a doubt, that funding for the final stages of development and marketing of Palm Computing's organizer (code named Touchdown) would be available. Despite many roadblocks and some deadends in the process, she had persisted and had developed several financing alternatives. The idea of selling the company had not even been one of them when she started the capital search in mid-1994, but now that the USR offer was on the table, she decided it was worth evaluating along with Palm's other options. Palm Computing, Inc. 1995: Financing Challenges Donna Dubinsky paced the floor of her Los Altos, California office, talking quickly and pausing only when Jeff Hawkins interjected a comment. They were reviewing the top secret meeting they had held the day before with Jon Zakin of Chicago-based U.S. Robotics (USR). Dubinsky and Hawkins did not yet want anyone to know they were even considering a USR purchase of Palm, so the two of them, along with Ed Colligan, Palm's Vice President of Marketing, met Zakin near the airport and listened to what he had to say about USR. They were surprised by how quickly talks with USR had escalated from a simple equity investment to outright purchase. Only a week before, Dubinsky and Hawkins had met Zakin for dinner at the Fish Market and what began as a low key discussion about a possible USR investment in Palm led to his proposal that USR acquire Palm. Dubinsky wanted to get Hawkins' thoughts on Zakin's offer as soon as possible. Though she was the president and CEO of Palm Computing, any business decision of this magnitude would be made only after the two had fully discussed and agreed upon the final direction. Hawkins was, after all, the company's founder, chairman, chief technology officer, and major shareholder, as well as a trusted friend. USR's proposal was only one of several financing offers that they would be considering and each of the options came with its own unique risks and rewards. Dubinsky moved to the white board on the office wall and began marking off columns. Hawkins leaned back in his chair as she scrawled Objectives along the left hand side and began filling in brief notes, dates, and dollar amounts. Across the top, she added Venture Capital, Alpha Computers?, USR, and Other. In spite of the fact that the last 15 months of searching for capital had been exhausting, Dubinsky was exhilarated on that late August afternoon in 1995. She knew, without a doubt, that funding for the final stages of development and marketing of Palm Computing's organizer (code named Touchdown) would be available. Despite many roadblocks and some deadends in the process, she had persisted and had developed several financing alternatives. The idea of selling the company had not even been one of them when she started the capital search in mid-1994, but now that the USR offer was on the table, she decided it was worth evaluating along with Palm's other options