3Com Soars as Online Chatter
Spreads Rumors of a Takeover
An INTERACTIVE JOURNAL News Roundup
Wall Street Journal
PALO ALTO, Calif. -- 3Com Corp. soared on Friday, fueled by another round of speculation that it is being eyed for acquisition by a large technology company.
3Com shares surged as much as 21% as online investors circulated a list of potential suitors for the networking company. The company declined to comment on the matter, but that didn't stop the steady stream speculation.
Participants in a message board on Yahoo! Finance (quote.yahoo.com) were certain the company was being acquired by Intel, which has recently made strong commitments to building its networking ventures. They pointed to Intel's planned $2.2 billion acquisition of Level One Communications, a maker of communications and networking chips, as a sign the company was going shopping in the networking sector.
But a spokesman for Intel said he has heard the same 3Com takeover rumors for months. "There's just nothing cooking right now," he said.
Another rumor claimed the company was being considered for purchase by Telefon AB L.M. Ericsson. It stemmed from an Internet posting in the financial section of Yahoo! Web site in which California Technology Stock Letter writer Michael Murphy was quoted saying he believes Ericsson met with 3Com three weeks ago. Mr. Murphy, whose company is based in Half Moon Bay, Calif., made the comments in a recent interview.
A spokeswoman for Ericsson said the company, as a policy, doesn't comment on rumors. "But I can tell you we deal with things like this every day, and this is just one in a string of many rumors," she said.
The Santa Clara, Calif., company has been the subject of takeover speculation on and off for more than a year as it has tried to reassert itself in the data-networking market.
The rumors took hold among technology investors, who have seen other data networking companies get scooped up by telecommunications companies eager for entry into the market.
On Friday, 3Com shares traded as high 27 on the Nasdaq Stock Market before pulling back somewhat. At the end of the session, the shares were still up 3 1/2, or 16%, to 25 13/16. Volume was 33.8 million shares, compared with average daily volume of 10.8 million.
The stock got a boost earlier this week after Needham & Co. analyst Peter Lieu on Monday raised his rating on the shares to "strong buy" from "buy." Mr. Lieu cited the company's successful Palm Pilot hand-held computer business and its moves into high-growth markets for digital-subscriber-line equipment, cable modems and telephony gear.
3Com has faced declining prices and slowing growth for relatively low-profit products, such as modems. It has a dominant position in modems and network adapter boards. 3Com was forced to warn in March that profit in its fiscal third quarter ended Feb. 26 would be about a third less than analysts expected; it later barely topped their diminished expectations. |
