3Com To Spin Off Palm Division
By Todd Spangler, Inter@ctive Week
September 13, 1999 9:40 AM ET
zdnet.com
After months of speculation about such a move, 3Com today announced that it will spin off its successful Palm Computing division to make it an independent, publicly traded company.
3Com expects to make an initial public offering for its Palm Computing subsidiary early next year, the company said, and it plans to eventually spin off the balance of the shares of the new publicly traded company to 3Com shareholders so that 3Com shareholders will own shares in both Palm Computing and 3Com.
3Com said that directors James Barksdale, former chief executive of Netscape Communications, and Gordon Campbell, president and chairman of Techfarm, will move to Palm's board of directors.
3Com said decisions regarding other executive management of Palm Computing will be announced later, calling into some question what the exact role will be for Alan Kessler, who was appointed president of the division in June.
With the announcement, 3Com released specific financial information on the size of the Palm business. 3Com said the Palm division had sales of $570 million for the fiscal year ended May 28. The company also disclosed that its revenue from Palm handheld devices and related products has more than doubled annually.
Palm has a substantial lead over Microsoft's Windows CE operating system, which critics have complained is too bulky and complicated compared with the more streamlined Palm OS platform. Palm currently has more than 4 million Palm handhelds, including the most recent addition to the family, the Palm VII.
3Com said the restructuring will allow the traditional part of the business to better focus on networking technology - although some analysts have questioned the wisdom of spinning off Palm, the fastest-growing area of the company. 3Com has seen its profits shrink somewhat with a slowdown in its historical areas of strength, modems and network adapter cards, which have become more or less commodities.
"The formation of two distinct companies, each with greater flexibility, agility and focus, is expected to create more value for our shareholders, customers and employees," 3Com CEO Eric Benhamou said in a statement.
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