3Com soars ahead of the Palm IPO

Investors can't buy the initial public offering (IPO) of Palm yet, but they sure are buying 3Com
Written by Larry Dignan, Contributor

Shares of 3Com soared 15 3/16 to 113 3/16 on Wednesday, the eve of the Palm spin-off. After the IPO, 3Com will own about 93 percent of Palm. The company plans to distribute its Palm shares to 3Com shareholders within six months.

Last year, 3Com shares closed at 47, but investors are using it as a proxy for shares of Palm. "Palm has been one of the most widely anticipated IPOs since it first came into the system," said David Menlow, analyst with IPOfinancial.com.

The buzz around the Palm is deafening. The maker of the Palm Pilot handheld computer device said on Monday that it had raised the projected price range for its IPO to $30 to $32 (£18 to £19) per share from $14 to $16 (£8 to £9) a share. Palm plans to offer 23 million shares. Goldman Sachs is the lead underwriter with Morgan Stanley, Merrill Lynch and Robertson Stephens assisting.

The company boasts a whopping market share of more than 60 percent and has sold over 5.5 million Palm devices worldwide. For the six months ending 26 November, the company reported a profit of $22.5m (£13.9m) on sales of $435m (£269m). For the year ending 28 May, Palm reported a profit of $29.6m (£18.3m) on sales of $563.5m (£349m).

Palm said it primarily competes with Casio, Compaq, Hewlett-Packard, Psion (quote: PON), Sharp and Palm platform licensees, such as TRG and Handspring. On the operating system side of the business, Palm competes with Microsoft's Windows CE software.

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