Treo smartphone maker Palm said last night it will sell a 25 per cent stake to private equity firm Elevation Partners for $325 million.
Palm shares climbed more than 8 per cent on the news.
Investors hope the cash infusion from the deal with Elevation, in which U2 star Bono is a partner, and the appointment as executive chairman of Jon Rubinstein, formerly general manager of Apple's iPod unit, will revive the Palm brand and perhaps develop a relationship with Apple.
Palm popularised the personal digital assistant in 1996, but it is now trying to regain its status as a top device maker amid stiff competition from bigger phone rivals, such as Motorola and Nokia.
Most analysts viewed the news with guarded optimism, noting that any devices borne of Palm's changes would not surface for more than a year, during which the strength of Palm's rivals will build.
The Elevation Partners deal comes one week after Palm introduced a portable computer, Foleo, to lukewarm reviews.
Palm has long been viewed as an acquisition target, thanks to its well-known brand, operating system and relationship with mobile-phone carriers, but analysts said the Elevation deal should end that speculation.