Palm's Price Skyrockets in Initial Public Offering

SAN FRANCISCO (03/02/2000) - Stock in 3Com Corp.'s Palm unit blasted off today following an initial public offering in which its share price rose as high as US$160 before leveling off by mid-afternoon at $101 per share, still a 167 percent gain.

Palm Inc.'s leading position in handheld computing devices and its strong sales drove intense interest in its IPO at a time when many publicly offered companies have little or no track record, analysts said.

In the days leading up to the IPO, 3Com adjusted the pre-offering price from $15 per share to $30 per share before settling on $38 late Wednesday.

Palm, formerly a wholly-owned subsidiary of 3Com, is selling 23 million shares of common stock, and after the sale, will be a separate, publicly traded company, Palm said in a statement. After the offering, 3Com will still own about 95 percent of Palm, or 532 million shares.

Palm will also privately sell 2,105,263 shares to America Online Inc., 1,710,526 to Motorola Inc, and 2,105,263 shares to Nokia Corp., Palm said.

Palm held 66.4 percent of the U.S. market for handheld devices as of mid-1999, Randy Giusto, an analyst with International Data Corp. (IDC), said today in a telephone interview. The company posted sales for the quarter ending Nov. 26, 1999 of $261 million, up 50 percent over the same quarter a year previous.

However, Palm is facing increasingly tough competition, Giusto said.

"They are a formidable force, but the market is going to get a lot more competitive in the next 12 to 24 months," Giusto said. Palm will have to compete with small computing devices that run on Microsoft Corp.'s Windows CE operating system and products from Casio Computer Co., Compaq Computer Corp. and Hewlett-Packard Co., he said.

3Com, in Santa Clara, California, can be reached at +1-408-326-5000, or at http://www.3com.com/.

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