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

To: Mang Cheng who wrote (43701)	7/5/2000 8:45:34 PM
From: David E. Taylor	Respond to of 45548

Mang: There'll be 350 million (+/-) COMSv shares for 3Com to buy on Friday, since 3Com can bid on the ex-distribution market for as many as they're prepared to buy. There will also be the same number of COMSv shares potentially for sale (including yours and mine), the only question is, at what price? For me, the answer is not below $15, certainly above $20. David T.

To: Mang Cheng who wrote (43701)	7/6/2000 6:36:25 PM
From: David E. Taylor	Read Replies (2) \| Respond to of 45548

Mang/Sunfish/Greg: I also thought it would be unlikely for 3COM to buy back any shares until at least COMSv starts trading, but after catching up on my reading and reviewing the Q4 earnings release, it seems to me like they've already bought back over 14 million shares. Consider these facts: (1) The last 10Q for Q3 ended 2/25/00 states that the total number of shares outstanding was 365,825,000 as of that date, and that there were 14,564,000 exercisable employee options outstanding. (The 10Q also shows basic and diluted shares at 345,706,000 and 360,600,000, but those were weighted averages for the entire Q3). (2) The Q4 earnings release shows that both the basic and fully diluted share counts for Q4 (ended 6/2/00) were identical at 351,419,000. The fact that the basic and fully diluted numbers are identical implies that as of 6/2/00, there were no immediately exercisable employee options - not surprising for the reasons I outlined in an earlier post, the employees want their piece of PALM as badly as we do! The fact that the two numbers are both 351,419,000 implies that the 14,564,000 employee options outstanding as of 2/25/00 were not only exercised, but also that 3Com repurchased the resulting shares during Q4. When I thought about this, it makes sense. Exercising their options cost the employees $25 to $30 per share, cash which wound up in the corporate coffers, and with COMS trading between $40 and $45 for much of Q4, 3Com could have repurchased the shares for around $15/share. They would have spent on the order of $220 million to do this, leaving $780 million of the war chest for further buy backs and share price support. If my reasoning is correct, we can get a fix on the distribution ratio to be announced 7/11. It will be 532,000,000 PALM divided by 351,419,000 COMS, or 1.5139. Thanks in advance EB & Co. Some of the skeptical press in months past has pegged the potential dilution of employee options to result in 1.46 or less. Looks to me like we'll get better than 1.5. And the 7/11 announcement of the higher D-Ratio could give COMS another poke in the right direction. David T.