I see a light at the end of the tunnel. Still confusing, though, as 3Com sans Palm at the close was worth about a negative 4.63/share, including their >$8 share in cash. Either PALM has a lot of downside in the next few weeks, or COMS has a lot of upside.
Only your hairdresser knows for sure.
Headline: 3Com Board Sets Record Date and Distribution Date
for Palm Stock Dividend; Also Announces Expanded Stock
Repurchase Program Of Up To One Billion Dollars
SANTA CLARA, Calif.--(BUSINESS WIRE)--May 8, 2000--3Com
Corporation (NASDAQ:COMS) and Palm, Inc. (NASDAQ:PALM) today announced
that 3Com's Board of Directors has declared a stock dividend of all of
3Com's shares in Palm. The shares will be distributed to 3Com
shareholders of record as of 5:00 p.m. Eastern Daylight Time on July
27, 2000. The record date which establishes the ratio of Palm shares
to be distributed per 3Com share will be 5:00 p.m. Eastern Daylight
Time on July 11, 2000. 3Com currently owns 532 million shares, or
approximately 94.3 percent, of the outstanding common stock in Palm.
"Today's announcement follows through on our commitment to
spin-off our handheld business and increase shareholder value, as
communicated last fall," said Eric Benhamou, 3Com Chairman and CEO.
"We're pleased to confirm the distribution of our Palm holdings will
occur more quickly than our previous estimates."
"The establishment of two fully independent and publicly traded
companies, 3Com and Palm, will maximize both companies' focus and
ability to strengthen their leadership in their respective markets,"
continued Benhamou.
On May 8, 2000, 3Com received a ruling from the Internal Revenue
Service that the Palm distribution will be tax-free to shareholders
for U.S. federal income tax purposes. The number of shares of Palm
common stock that each holder of a share of 3Com common stock will
receive will be based on the actual number of shares of 3Com common
stock outstanding on the record date. Based on the approximately 351
million shares of 3Com common stock outstanding as of April 24, 2000,
the distribution ratio would be approximately 1.5 shares of Palm for
every share of 3Com. There are approximately 14 million immediately
exercisable options for 3Com common stock that could be exercised
between now and the record date. Therefore the final ratio will be
based on the actual number of shares outstanding as of the record date
July 11. 3Com shareholders will receive whole shares of Palm and cash
payments for fractional shares. Cash received in lieu of fractional
shares will be taxable.
An information statement will be mailed to 3Com shareholders of
record after July 11. The information statement will include the final
distribution ratio, as well as information on how to calculate the
share cost basis.
Expanded Stock Repurchase Program:
3Com also announced today that its Board of Directors has
authorized expansion of the company's stock repurchase program in the
amount of up to one billion dollars. The company is exploring various
methods for the repurchase of shares including, but not limited to,
accelerated repurchase agreements with broker dealers and more
traditional open market purchases. Such purchases could be used to
offset shares created as a result of employee's exercising stock
options and employee stock purchase plan requirements. This new
program replaces previous authorizations totaling 45 million shares
between June 1998 and September 1999. During fiscal 2000 the company
repurchased 20.5 million shares, bringing the total number of shares
repurchased since June 1998 to 35.3 million, which represents a total
outlay of $919.3 million.
"We believe this expanded stock repurchase program is an important
component in our multiple efforts to increase shareholder value,"
continued Benhamou. "Our strong balance sheet which includes over $3
billion in cash and short-term investments is the foundation for this
repurchase program, as well as for strategic investments and
acquisitions."
The amount and timing of shares to be purchased will be based on
several factors, including method of repurchase selected, the price of
the company's stock, the level of stock issuances under the company's
employee stock plans and market conditions. The Board has authorized a
two-year time limit on the repurchase authorizations, and except for
re-issuances in connection with employee stock programs, there are no
specific plans for shares that might be purchased
Stock Option Adjustment in Connection with the Palm Distribution
As communicated in the Palm S-1 public registration statement
filed with the Securities and Exchange Commission, 3Com anticipates
adjusting employee stock options in connection with the Palm
distribution. Such an adjustment in the quantity and exercise strike
prices for outstanding options will preserve the intrinsic value of
the options as follows: 3Com will calculate the relationship (the
"Ratio") between the opening price of 3Com common stock on the first
trading day after distribution and the closing price of 3Com common
stock on the last trading day before distribution. The number of new
3Com options outstanding after the Palm distribution will be equal to
the quotient of the number of 3Com options outstanding immediately
before distribution divided by the Ratio. The new option strike prices
for the underlying outstanding options will be equal to the product of
the option exercise strike prices before distribution multiplied by
the Ratio. The options will continue to have the same terms and
conditions set forth in the 3Com Stock Plans including vesting
schedules.
As of April 24, 2000 there were approximately 41 million employee
options outstanding. Of this amount, approximately 14 million options
were immediately exercisable. The total number of 3Com shares
outstanding as of April 24, 2000 was approximately 351million.
Stock Option Conversion for Palm employees in Connection with the
Palm Distribution
Similarly, 3Com stock options held by Palm employees will be
assumed by Palm and converted into Palm options. This process will
occur as follows: The option conversion will be achieved by
calculating the relationship (the "Palm Ratio") between the opening
price of Palm common stock on the first trading day after distribution
and the closing price of 3Com common stock on the last trading day
before distribution. The number of new Palm options outstanding after
the Palm distribution will be equal to the quotient of the number of
3Com options outstanding immediately before distribution divided by
the Palm Ratio. The new option strike prices for the underlying
outstanding options will be equal to the product of the 3Com option
exercise strike prices before distribution multiplied by the Palm
Ratio. The options will continue to have the same terms and conditions
set forth in the 3Com Stock Plans including vesting schedules.
As of April 24, 2000, there were approximately 4.0 million 3Com
stock options outstanding held by Palm employees. Of this amount,
approximately 1.4 million options were immediately exercisable. For
further information about the 3Com options held by Palm employees,
please see the Employee Matters Agreement entered into between Palm
and 3Com on February 26, 2000 and included as an exhibit in 3Com's
fiscal quarter 10Q filed on April 4, 2000 or as an exhibit to Palm's
fiscal third quarter 10Q filed on April 10, 2000.
For additional information on the Palm distribution, please visit
3Com's investor relations' Web site, at www.3com.com/investor, or call
our toll-free investor information line at 877/463-6326 (U.S. only) or
703/386-9710 (internationally). Investor information on Palm, Inc. can
be obtained at www.palm.com, or by calling 877/OWN-PALM (U.S. only).
For questions regarding shareholder certificates or address changes,
please contact EquiServe investor relations department: 781/575-3120.
About 3Com Corporation
With more than 300 million customer connections worldwide, 3Com
Corporation connects more people and organizations to information and
each other in more innovative, simple and reliable ways than any other
networking company. 3Com delivers web-enabled solutions to consumers,
small- to medium-sized business sites and network service providers.
For more information, visit 3Com's web site @ www.3com.com/pressbox.
About Palm, Inc.
Palm, Inc. is the leading provider of handheld computing devices
(IDC, Dec. 1999), including the Palm III(TM), Palm V(TM) and Palm
VII(TM) series of handheld computers. The Palm OS(R) platform is the
foundation for the company's market-leading handheld computers as well
as products from its strategic partners such as IBM, QUALCOMM,
Franklin Covey, Handspring, TRG and Symbol Technologies. Designed to
support the increasingly mobile, wireless and geographically dispersed
nature of information management, the company's handheld solutions
allow people to carry their most critical information in their
pockets. For more information, please visit www.palm.com.
In connection with the Palm distribution, 3Com management plans to
proactively communicate with investors through active participation in
investor conferences and analyst meetings and visits. For more
information, please contact 3Com investor relations at 408/326-5000,
or visit Palm's Web site: www.3com.com/investor.
PALM DISTRIBUTION FAQ
Q1) When will I need to own 3Com shares in order to receive Palm
shares?
A1) If you own 3Com shares as of 5:00 p.m. Eastern Daylight Time
on the record date, July 11, 2000, you are eligible to receive Palm
shares in the Distribution. If you purchase 3Com shares in the
"Regular Way" market after July 11, 2000 but before the Distribution
date, you will also receive Palm shares in the Distribution. To learn
more about buying or selling 3Com shares between the record and
distribution date, please see question 14 below.
Q2) How many shares of Palm will I receive in the distribution?
A2) The exact number of Palm shares that a 3Com shareholder of
record will receive is dependent on the number of 3Com shares
outstanding on the record date, July 11, 2000, relative to the
approximately 532 million Palm shares to be distributed (distribution
ratio). The final distribution ratio will not be calculated and
announced until several days following the record date.
To calculate the exact number of Palm shares to be distributed to
each 3Com share, we will divide the approximately 532 million Palm
shares owned by 3Com by the outstanding 3Com shares on the record
date. Currently there are 351 million shares of 3Com outstanding.
Using the current outstanding shares, approximately 1.5 shares of Palm
will be distributed for each share of 3Com.
Q3) What is the "record date" and why is it important?
A3) The record date is the date at which the ratio of Palm shares
to 3Com shares is fixed. Any 3Com shares outstanding as of the record
date are eligible to receive the Palm distribution. The record date
for the Palm distribution is July 11, 2000 at 5:00 p.m. EDT.
Q4) What and when is the distribution date? When will I actually
receive my Palm shares?
A4) The "distribution date" is the date when a dividend of Palm
shares is distributed to 3Com shareholders. This date is set for July
27, 2000.
If you hold your 3Com shares through a stockbroker, bank or other
nominee, that firm will credit your Palm shares to your account. You
should allow several days following July 27, 2000 for this to occur.
If you hold your 3Com shares in a certificate, 3Com's transfer
agent, EquiServe, will mail shares of Palm to you on or about August
14, 2000. You should allow up to 14 days after this mailing date for
your Palm share certificates to arrive.
Q5) Will the current trading price of either 3Com or Palm affect
the number of shares I receive?
A5) No, the current trading prices of the stocks will not affect
the number of shares you receive or the distribution ratio.
Q6) Will the number of 3Com shares I own increase or decrease
after the distribution?
A6) The distribution will not change the number of 3Com shares you
own. You will receive only Palm shares in the distribution. If you
have a 3Com certificate, you will not need to send in your
certificate. Please watch your mail for an Information Statement that
will be sent on or about July 14.
If you are an employee of 3Com Corporation or Palm and own shares
through 3Com's benefit plans, please visit the 3Commmunity Web site or
the Inside Palm Employee interim Web site.
Q7) How do I calculate the cost basis for tax purposes of the Palm
shares I will receive following the distribution?
A7)On approximately July 14, an Information Statement will be
mailed to each 3Com shareholder of record. Included in this packet
will be information to assist you in determining the cost basis of
your shares.
Q8) What will happen to 3Com's share price and Palm's share price
at the time of distribution?
A8) We can't predict at the share price for either stock at the
time of distribution. We anticipate that the market price of 3Com
stock will adjust to reflect the distribution of the value of the Palm
shares out of 3Com. Factors such as market conditions, industry
dynamics and the economy will all factor into determining the market
price of any stock, including 3Com and Palm.
Q9) Where can I get more information about Palm?
A9) Information about Palm, Inc. is available on Palm's Web site
at www.Palm.com, or you can call 877/OWN-PALM. In addition,
information about Palm will be included in the Information Packet to
be mailed to shareholders of record on approximately July 14, 2000.
Q10) Who should I call with questions about my stock account or my
share certificates?
A10) If you hold your 3Com shares in a brokerage or bank account,
please contact your representative at that bank or brokerage firm. If
you hold share certificates issued by 3Com Corporation in your name,
please call EquiServe at 781/575-3120
Q11) Is the distribution tax-free?
A11) The U.S. Internal Revenue Services has ruled in a private
letter that the distribution of Palm will be free of U.S. federal
income taxes. This means that for U.S. federal income tax purposes,
3Com shareholders will not recognize a gain or loss when they receive
Palm shares. However, depending upon your cost basis, a gain or loss
for tax purposes may be recognized upon sale of your Palm shares. Any
cash received in lieu of fractional shares will be taxable upon
receipt for U.S. federal income tax purposes.
International shareholders should consult with a personal tax
advisor to determine the taxable effect of this distribution. Most
jurisdictions outside the United States will tax the distribution.
Q12) Will I receive the Palm stock dividend for all 3Com shares
that I own?
A12) If you purchase 3Com stock in the "Regular Way" market and
the purchase settles prior to the Distribution date, you will be
eligible to receive a Palm dividend. This means that you must own
shares of 3Com Corporation in either a certificate form, as an account
with EquiServe (our transfer agent) or in your brokerage or bank
account. If you own shares through 3Com's employee benefit plans,
please visit the 3Community employee Web site or the Palm Employee Web
site.
Q13) If I hold a mutual fund that owns 3Com Corporation shares,
will I receive Palm shares?
A13) If you hold a mutual fund that owns 3Com Corporation, you
need to check with your mutual fund advisor to see if you will be
receiving a distribution of Palm shares.
If you own shares through 3Com's employee benefit plans, please
visit the 3Community Web site or the Palm Web site. Restricted shares
held under one of 3Com's incentive stock plans will receive a
restricted dividend of Palm shares.
Q14) Why are there different stock symbols for 3Com?
A14) The difference in the stock symbols is due to the creation of
two markets in 3Com stock: a "regular way" and an "ex-distribution"
market. Between July 7 and July 27, the regular way market will trade
3Com stock under the ticker symbol COMS and will include an
entitlement to receive the dividend of Palm shares. The
ex-distribution market will trade 3Com stock under the ticker symbol
COMS V and will not include an entitlement to receive shares of Palm.
Since the COMS shares effectively include the Palm shares, the price
of these shares will be higher than the COMS V shares.
People who own shares of 3Com common stock at the distribution
date under the ticker COMS will receive Palm shares shortly after the
distribution. People who sell shares of 3Com common stock under the
ticker COMS prior to the distribution date will also sell their
entitlement to receive shares of Palm.
The ex-distribution market will end at market close on July 27,
2000. At that time, the COMS V ticker and market for this stock will
disappear and 3Com will only be traded under the ticker symbol, COMS
without the entitlement to receive Palm shares.
Q15) Why are there different stock symbols for Palm?
A15) The difference in the stock symbols is due to the creation of
two markets in Palm stock: a "regular way" and a "when-issued" market.
Between July 9 and July 27, the regular way market will trade Palm
stock that is not currently held by 3Com under the ticker symbol PALM.
The when-issued market will trade Palm stock that a 3Com shareholder
of record is due to receive on the distribution date under the ticker
symbol, PALM V and those that purchase these PALM V shares will not
receive shares until after the distribution occurs in July.
There should not be any material difference between PALM and PALM
V stock prices.
The when-issued market will end at market close on July 27, 2000.
At that time, Palm will only be traded under the ticker symbol, PALM.
Q16) Why is the COMS V price different from the COMS price?
A16) The difference is because COMS traded between the record date
and the distribution date will include the attached value for Palm
shares. The COMS V stock represents 3Com without the value of the Palm
shares, so its price is lower. If you sell stock in COMS between the
record and the distribution date, you will sell your right to receive
Palm shares in the distribution.
After the July 27, 2000 distribution date, COMS will only trade
under one symbol, COMS, which will not include the value of Palm
shares.
STOCK REPURCHASE FAQ
Q1) Why are you extending your stock repurchase program?
A1) We believe this expanded stock repurchase program is an
important component in our multiple efforts to increase shareholder
value. In addition, the repurchased shares will, in part, be used to
fulfill employee stock programs.
Q2) How many shares will you repurchase and when will you do it?
A2) The amount and timing of shares to be purchased will be based
on several factors, including the price of the company's stock, the
level of stock issuances under the company's employee stock plans and
market conditions. The Board has authorized a two-year time limit on
this authorization.
Q3) How many shares have you repurchased since the program began?
A3) During fiscal 2000 the company repurchased 20.5 million
shares, bringing the total number of shares repurchased since the
program began in June 1998 to 35.3 million.
Q4) How many shares has the board authorized prior to this new
program?
A4) This new program follows previous authorizations for 10
million shares in September 1999, 15 million shares in June 1999, 10
million shares in March 1999 and 10 million shares in June 1998.
Q5) Prior to this authorization, how many shares were available
for purchase?
A5) 45 million shares have been authorized for repurchase and 35.3
million shares have been repurchased to date.
Q6) Why are you allocating so much cash to repurchasing shares?
Don't you have better uses of cash like acquiring companies or
technology?
A6) Our strong balance sheet, which includes over $3 billion in
cash and short-term investments, is the foundation for this repurchase
program, as well as for strategic investments and acquisitions.
Q7) Does the authorization to repurchase stock have any
implications for future acquisitions/mergers or investments?
A7) With over $3 billion in cash and short term investments, we
believe we have sufficient cash to fund the types and amounts of
investments and acquisitions in executing our strategy in the
foreseeable future.
OPTION ADJUSTMENT AND CONVERSION FAQ
Q1) Why are 3Com stock options being adjusted?
A1) Options held by 3Com employees are being adjusted to maintain
the intrinsic value of the options outstanding immediately before and
immediately after the Palm distribution. The adjustment will affect
both the quantities and strike prices of options that each employee
holds.
Q2) What's the difference between an adjustment and a conversion?
A2) 3Com stock options held by 3Com employees will be adjusted at
distribution in terms of re-setting the number of options and the
strike prices in order to maintain the intrinsic value. 3Com stock
options held by Palm employees will be converted into Palm stock
options, again in such a way as to maintain the intrinsic value
immediately before and immediately after distribution.
Q3) Will all 3Com stock options be adjusted?
A3) Yes, all 3Com stock options held by 3Com employees as the
distribution date will be adjusted.
Q4) If I'm a former 3Com employee with stock options, how will I
be impacted?
A4) Employees have 90 days after their date of termination to
exercise any vested options. Terminated employees with vested options
as of July 7, 2000 and whose 90 days expire before the distribution
date of July 27, 2000 are strongly encouraged to exercise their
options by July 7 in order to maximize the value. Any options
exercised between July 8 and July 27 will not include the entitlement
to the Palm dividend and will not have the option prices and
quantities reset. If the 90 day period expires after the distribution
date, the option strike prices and quantities will be reset as
described above immediately after the distribution. The terminated
employee can then exercise any vested options at the new strike prices
up until the 90th day after his or her termination date.
Q5) How will the 3Com stock option adjustment be determined?
A5) As communicated in the Palm S-1 public registration statement
filed with the Securities and Exchange Commission, 3Com will adjust
stock options in connection with the Palm distribution. 3Com
anticipates making an adjustment in the quantity and exercise strike
prices for all outstanding options in order to preserve their
intrinsic value as follows: 3Com will calculate the relationship (the
"Ratio") between the opening price of 3Com common stock on the first
trading day after distribution and the closing price of 3Com common
stock on the last trading day before distribution. The number of new
3Com options outstanding after the Palm distribution will be equal to
the quotient of the number of 3Com options outstanding immediately
before distribution divided by the Ratio. The new option strike prices
for the underlying outstanding options will be equal to the product of
the option exercise strike prices before distribution multiplied by
the Ratio. The options will continue to have the same terms and
conditions set forth in the 3Com Stock Plans including vesting
schedules.
Q6) How will the 3Com stock option conversion for Palm employees
be determined?
A6) 3Com stock options held by Palm employees will be converted
into Palm options as follows: The option conversion will be achieved
by calculating the relationship (the "Palm Ratio") between the opening
price of Palm common stock on the first trading day after distribution
and the closing price of 3Com common stock on the last trading day
before distribution. The number of new Palm options outstanding after
the Palm distribution will be equal to the quotient of the number of
3Com options outstanding immediately before distribution divided by
the Palm Ratio. The new option strike prices for the underlying
outstanding options will be equal to the product of the 3Com option
exercise strike prices before distribution multiplied by the Palm
Ratio. The options will continue to have the same terms and conditions
set forth in the (the 3Com Stock Plans) including vesting schedules.
CONTACT: 3Com
Pamela Sklar, 408/326-8726 (Public Relations)
pamela_sklar@3com.com
Shirley Stacy, 408/326-6301 (Investor Relations)
shirley_stacy@3com.com
KEYWORD: CALIFORNIA
INDUSTRY KEYWORD: TELECOMMUNICATIONS NETWORKING DIVIDEND
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