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Technology Stocks : 3Com Corporation (COMS) -- Ignore unavailable to you. Want to Upgrade?

To: Andre Williamson who wrote (43319)	5/22/2000 12:08:00 PM
From: Robohogs	Respond to of 45548

The adjustment will be that the option price would halve and the number of options would double - the reason being that COMS is keeping people whole after the divestiture. So, someone who has options on 1 million shares at $40 would have 2 million shares at $20 ($40 million notional in each case). The increase won't be that dilutive as the options at $40 vs. $40 stock would become $20 vs $20 stock. The twice the quantity does hurt but is offset somewhat by the fact that PALM employees will get PALM options and not COMS options.

To: Andre Williamson who wrote (43319)	5/25/2000 7:36:00 AM
From: David E. Taylor	Read Replies (1) \| Respond to of 45548

Andre/Allen/Mang: For some reason I can't get a link to the online 5/9 WSJ article on the PALM spinoff and COMS share dilution due to employee options being exercised, but the relevant quotes are: "3Com now has approximately 351 million shares outstanding, but that number could rise as employees exercise options. 3Com said there are about 14 million employee options that could be exercised by July 11. 3Com owns roughly 94.3% of Palm, or about 532 million shares." "Some analysts have expressed concern that the option adjustment could result in massive dilution at 3Com, by issuing hundreds of millions of new options. Chris Paisley, 3Com's chief financial officer, said in an interview that the share-repurchase program is intended to mitigate the dilution." So the concern was not the WSJ but some un-named "analysts. I posted a brief summary of the employee options position and COMS potential dilution back on 5/11: Message 13687254 IMO, "hundreds of millions of new options" is a real stretch, and unlikely, unless COMSV starts trading around well under 10 and stays there. I also think the treatment of 3Com employee unexercised options is fair, and preserves their intrinsic value. After all, 3Com employees in the former Palm division who went with Palm will get Palm options for their present 3Com options, 3Com employees with exercisable COMS options will get PALM shares, and COMS shareholders will get PALM shares. OTOH, 3Com employees with unexercisable COMS options will wind up with only COMS options of greatly reduced value once PALM has gone, so they deserve to be adjusted to preserve their pre-spin off value. And though I don't have the numbers on hand, my recollection is that the lions share of those unexercised options is held by the rank and file employees, and not by management, directors, and other big-wigs. Just my 2c worth. David T.