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3Com Palms off future to IPO

3Com Palms off future to IPO

3Com last week announced its plan to split the company in two, taking its Palm Computing subsidiary public.

3Com expects to launch the initial public offering (IPO) of Palm Computing over the next three to four months, most likely in January 2000, CEO Eric Benhamou said.

The move is designed to allow each company to separately focus on growth opportunities in their core markets, and create more value for shareholders, customers and employees.

According to 3Com's new managing director, Archie Wilson, some confusion has existed in the marketplace over the company's apparently divergent strategies on Palm devices and networking equipment.

3Com's Palm Computing subsidiary makes the popular handheld devices Palm III, Palm V and Palm VII. The other part of 3Com's business is focused on networking products such as routers, switches and modems.

Wilson explained the networking and Palm divisions already operate as separate businesses in Australia, but under one common infrastructure.

He does not anticipate too much change to the local operation or its channel structure, but said he was not clear yet exactly how it will operate on a country-by-country basis.

"The Palm division will operate like a sister company," he predicted.

Up to 20 per cent of Palm Computing's shares will be offered to the public, with the remaining 80 per cent originally held by 3Com, the company said. Those shares will later be spun off to 3Com shareholders, in what the company expects to be a tax-free transaction, according to Benhamou.

3Com will also license Palm's technology and will continue to support the company's growth. 3Com's own employees will be using Palm Computing devices to access corporate information, Benhamou said.

However, the impending split has already raised industry speculation about the future of 3Com's networking division, despite repeated assurances this will now be a core focus of the company.

"We're really going to free up the senior management team to focus on networking," Wilson said.

However, a number of ARN sources report the company is in discussions with Lucent, while earlier reports suggested Cisco as a possible suitor.

Wilson declined to comment on the rumours. "Our policy is not to comment about speculation on takeovers."

Asked if spinning off Palm Computing might make 3Com an even more attractive takeover candidate, Benhamou said there would be few tax benefits to such a transaction, but declined to comment further.

James Barksdale, the former Netscape Communications chief executive officer who is now a managing partner of the Barksdale Group, and Gordon Cambell, president and chairman of Techfarm, will also join the new Palm company's board of directors. Other management decisions will be announced before a filing is made with the US Securities and Exchange Commission.

Palm's current management team is still in place, and a search is on for a new chief executive officer, Benhamou confirmed. 3Com and Palm Computing will have separate boards of directors, chief executive officers and chief financial officers. The sales forces which are currently in place for both businesses will remain essentially unchanged, company officials said.

Benhamou said 3Com's networking business will have "full freedom of association and alliances. The natural partners for the networking business may not be the same as those for the handheld computing business, and vice versa."

3Com's networking business will concentrate on expanding its networking systems and connectivity businesses. The goal is to create networks, and Internet-related products and services that let people access and use information in new and innovative ways, the company said in a statement.

Palm Computing will concentrate its efforts on licensing handheld operating systems, making products and services for enterprise computing, wireline and wireless Internet services, portal sites and Palm-branded devices, 3Com said. It also expects to strike a number of new alliances and partnerships.


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