Palm (NASDAQ:PALM) may rattle now but, eventually, it will hum. So says Bono.

The U2 front man is part of Elevation Partners, an investment firm that last year committed $325 million to the Palm reclamation project. Yesterday it upped its stake by another $100 million.

"We believe that Palm is in a position to transform the cell phone industry, and we are pleased to have the opportunity to make this additional investment in the company," Elevation co-founder Roger McNamee said in a press release.

Pleased? McNamee's a smart guy and I have zero reason to doubt his competence but this isn't some Buffettesque deal. It's a bailout by an investment firm. Here's why: Elevation's investment buys series C preferred stock paying 0% interest and convertible at $3.25 a share, a 31% premium to Friday's close. Warrants further grant Elevation the right to acquire 7 million Palm shares, also at $3.25 each.

I'm as aggressive an investor as you'll find and I wouldn't touch this deal. Investors seem to have mixed feelings. Speculators briefly bid the shares to $3.71 yesterday before settling at $3.05, 6% below Elevation's break-even. Shares, however, are up today to around $3.50.

Can you blame investors for their trepidations? Palm has burned through almost $50 million in cash since February. Apple's (NASDAQ:AAPL) iPhone was the top selling handset in the U.S. during the third quarter. Research In Motion's (NASDAQ:RIMM) BlackBerry Storm is getting good reviews. And Nokia's (NYSE:NOK) N97 could be a winner if it ships in a timely manner.

Elevation is betting everything on its new handset and Nova, the new Palm operating system expected to debut next month at the Consumer Electronics Show. Why? Peter Burrows of BusinessWeek writes that Elevation has so much capital committed to Palm that it "will struggle to deliver decent returns" to investors if Palm doesn't turn itself around.

Or, to use the vernacular of the day, Palm is too big to fail (for Elevation Partners).

Wall Street, Detroit, the U.K. tech industry, and now, a one-time Silicon Valley icon. Welcome to Bailout Boulevard, Palm.

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