"3Com's Palm Unit Files for IPO; AOL, Motorola and Nokia to Buy Shares" - (this is from Bloomberg)
Tue, 14 Dec 1999, 1:47am EST
By Scott Lanman
Santa Clara, California, Dec. 13 (Bloomberg) -- 3Com Corp.'s
Palm Inc. unit, the No. 1 electronic-organizer maker, filed for
an initial public offering of stock, giving investors a way to
benefit from 3Com's fastest-growing business.
Nokia Oyj and Motorola Inc., the two biggest cellular-phone
makers, and No. 1 Internet service America Online Inc. agreed to
invest as much as $225 million to buy Palm stock in private
placements, giving the three companies as much as 4.5 percent of
the company's capital stock, the filing said.
3Com, the No. 2 computer-networking equipment maker, expects
to spin off Palm to 3Com shareholders six months after the IPO.
Palm filed with the Securities and Exchange Commission to sell
common stock valued at $100 million, though the filing gave no
details about precisely how many shares the company hopes to sell
or how much the IPO would raise.
''This will be very well-received'' by investors, said
analyst Patrick Houghton of Sutro & Co., who rates 3Com shares a
''buy.''
Houghton valued Palm at about $10 billion, or about two-
thirds of 3Com's $15.5 billion market value. Palm accounted for
$176.5 million, or 13 percent, of 3Com's $1.39 billion in revenue
in the quarter ended Aug. 27.
3Com shares rose 1 3/4 to 44 13/16 in trading on the Nasdaq
Stock Market. They climbed as high as 49 after the filing. The
shares have risen 64 percent since 3Com said on Sept. 13 that it
planned to spin off Palm. 3Com will own at least 80.1 percent of
Palm after the IPO.
Palm's Plans
More than 5 million Palm devices have been sold since their
introduction in 1996. The handheld units let users input phone
numbers and memos on a liquid-crystal screen with a stylus. In
recent months, 3Com has licensed the Palm operating-system
software to high-profile companies like Nokia and Sony Corp.
According to Palm's filing, Palm and America Online plan to
offer Internet services over Palm devices, while Motorola is
licensing the Palm software for new wireless products. For
America Online, it's the first time its service would be offered
on a handheld device. The company's flagship online service has
more than 19 million subscribers.
Nokia and AOL each agreed to buy the lesser of $80 million
or 1.5 percent of Palm's capital stock. Motorola agreed to buy
the lesser of $65 million or 1.5 percent of common stock.
The investments by Nokia, Motorola and America Online will
occur at the same time as the closing of the IPO, Palm's filing
said. The filing defined capital stock as outstanding common
stock as well as options that have been granted as of 2000.
Popular Devices
3Com's Palm devices, whose prices range from $179 to $499,
have functions like a phone and address book, to-do list and
message pad. They come with a stylus and software that recognizes
handwriting on its liquid-crystal screen. The units can swap
information with each other and with desktop personal computers.
The high-end Palm VII provides quick wireless Internet access.
3Com acquired Palm in June 1997 as part of its $8.9 billion
purchase of U.S. Robotics Corp., the world's biggest maker of
computer modems, which bought Palm in 1995 for about $47 million.
3Com has struggled with slower-than-expected sales, inventory
backups and falling prices from non-Palm lines acquired from U.S.
Robotics.
Palm, which has 630 employees and was founded in January
1992, is profitable. Its fiscal first-quarter net income rose 20
percent to $9.66 million from a year earlier, while net income in
the fiscal year ended May 28 rose more than sevenfold to
$29.6 million, according to the filing. First-quarter revenue
rose 52 percent.
Palm, which is changing its name to Palm Inc. from Palm
Computing Inc., received 31 percent of its sales outside the U.S.
in the fiscal first quarter.
Sony Veteran
On Dec. 2, 3Com said it picked a leader for Palm: Carl
Yankowski, 51, a Sony Corp. veteran who quit a day earlier as
president and CEO of Reebok International Ltd.'s Reebok brand of
athletic shoes and clothing, a position he held for 14 months. He
started as chief executive of Palm today.
Yankowski's base salary is $600,000,and he will get
$48 million in stock options, (Mang's note : what had this guy done to Palm
to deserve this ?) or no more than 2 percent of Palm's
outstanding shares, according to the filing.
He joins Palm President Alan Kessler, 42, who had headed
Palm since June and has been with 3Com since 1985, and Chief
Financial Officer Judy Bruner, 41, an 11-year 3Com employee who
moved to Palm in September.
Yankowski's appointment marked Palm's third round of
management changes in less than two years. Jeff Hawkins and Donna
Dubinsky, who developed and marketed the original PalmPilot, left
3Com last year to found their own electronic-organizer company,
Handspring Inc. Its device is based on Palm software, but offers
an expansion slot for digital-music players and other add-ons.
In June, Kessler replaced Robin Abrams, who had joined Palm
in February from Hewlett-Packard Co.'s VeriFone unit.
Filing Details
Details about how many shares will be sold, and how much the
company hopes to get for them, generally would be included in a
subsequent filing. Palm estimated total proceeds from the stock
sale at $100 million in order to calculate an SEC registration
fee. Companies, though, often use a nominal estimate in their
initial IPO filing and amend the number later.
In a July 1998 IPO filing, for example, Conoco Inc. listed
$100 million in expected proceeds for an offering that wound up
raising $4.4 billion. Goldman Sachs Group Inc. estimated
$10 million in proceeds in a filing that led to its $3.66 billion
IPO.
Underwriters for the stock sale will include Goldman, Sachs
& Co., Morgan Stanley Dean Witter & Co., Merrill Lynch & Co. and
Robertson Stephens. Palm said it will list on the Nasdaq National
Market and hopes to trade under the ticker symbol ''PALM.''
1999 Bloomberg L.P.
bloomberg.com
Mang
|
