Palm has sold a 25 per cent stake to a private equity partner in a move that will bring two key former Apple executives to the struggling smartphone maker in a bid to reverse its fortunes.

Elevation Partners, the Silicon Valley private equity firm that counts Bono, the activist musician, as a partner, will pay $325 million (£163 million) for a 25 per cent stake in Palm, which is struggling to compete with a slew of competitors.

The deal, Elevation’s largest to date, will bring Jon Rubinstein, Apple's former head of hardware and one of the executives who helped to pioneer the iPod to Palm as executive chairman.

Mr Rubinstein, who left Apple last year, will be charged with breathing life into Palm's flagging product portfolio.

This month his former employer is set to launch the iPhone, a new smartphone that will compete with Palm products, such as its Treo device.

Fred Anderson, a partner at Elevation and a former Apple chief financial officer, will also join Palm as a board member, as will Roger McNamee, another Elevation partner.

Eric Benhamou, the Palm chairman, and Scott Mercer, another director, will leave the board.

Shares in Palm jumped more than 14 per cent to $18.40 ahead of the bell in New York on the news.

The deal follows several months of exploratory talks by Palm with possible buyers after the group hired Morgan Stanley to advise on strategic options.

Discussions are thought to have been held with Motorola and Nokia and private equity firms including Silver Lake Partners and the TPG.

None of those groups agreed to buy out the entire company.

Under the terms of its deal with Elevation, Palm will pay $940 million in cash, or about $9 a share, to existing shareholders, whose ownership of the company will drop to 75 per cent.

The company will fund the restructuring with the $325 million from Elevation, $400 million in new debt and more than $200 million of cash on its balance sheet.

Palm declined to comment.

Analysts said that the deal was unlikely to solve many of Palm's key immediate challenges, such as its smaller size compared with competitors including Nokia, the world’s largest mobile phone maker, and Research In Motion, the Canadian group behind the BlackBerry e-mail device.

Palm has already made moves to broaden its product line, announcing last week the Foleo, a “mobile companion” fitted with a a ten-inch screen and full-size keyboard, which connects wirelessly with a smartphone.

The gadget, the size of a small laptop, received lacklustre reviews, with commentators questioning whether consumers would carry two devices with them.

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