Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: egggmann who wrote (44078)	7/20/2000 4:48:36 PM
From: egggmann	Read Replies (1) \| Respond to of 45548

What the hell, here's a copy Palm Likely to Be Added to S&P 500, Analyst Says (Update1) By Chelsea Emery New York, July 20 (Bloomberg) -- Palm Inc. is likely to be the next company added to the Standard & Poor's 500 Index, according to Lehman Brothers Inc. analyst Andrew Whittaker. The equity derivatives analyst, who this month correctly predicted S&P would add Stilwell Financial Inc., said S&P probably will announce today or tomorrow that it's adding the maker of electronic, hand-sized organizers. 3Com Corp., which owns 94 percent of Palm and is a member of the S&P 500, plans to spin off to shareholders its stake in the company on July 27. ``Index funds are already going to own Palm and that's key,'' Whittaker said. ``The S&P doesn't want to cause a lot of buying and selling for index funds. Also, Palm has earnings, it's in the U.S. and the liquidity is excellent.'' The S&P will likely drop one of the smaller members of the S&P 500, such as Bethlehem Steel Corp., Whittaker said. When 3Com spins off Palm, index-fund managers -- who try to mimic the performance of the S&P 500 by owning the companies in the index -- will receive shares of the handheld organizer maker. The S&P wants more technology-related companies in its index, Whittaker said. Of the 29 additions to the S&P 500 year to date, 14 have been technology-related, Whittaker said. That makes the S&P about 33.2 percent computer-related shares. Historical Precedent Additionally, the S&P has a history of keeping a spun-off company in the index, Whittaker said. For example, S&P announced Agilent Technologies Inc. would join the S&P 500 one week before Hewlett-Packard Co. spun off the designer of test and measurement devices, the analyst said. The same was true for Delphi Automotive Systems Corp., which General Motors Corp. spun off. When Stilwell was spun off from Kansas City Southern Industries Inc., S&P removed Kansas City Southern. Whittaker said there's a 90 percent chance S&P will add Palm and keep 3Com in the index. There is a precedent for both parts staying, said Elliott Shurgin, vice president of S&P Index Services, ``though it doesn't necessarily follow in the case of a spin-off that both will'' stay in or be removed. Shurgin declined to comment further. S&P has said it tries to minimize changes in the index. There's an estimated $800 billion in portfolios that try to match the performance of the index. As part of the spin-off, index funds will receive 40 million shares of Palm, through their ownership of 27 million 3Com shares, Whittaker said. The analyst estimates index funds would have to buy 3.4 million shares more to match the S&P 500 if the company was added. Whittaker said it's doubtful Palm shares would rise much if the announcement takes place. ``Less than a day's volume has to bought and that won't cause Palm shares to increase,'' he said. ``I'd be wary of investing on that basis.'' Santa Clara, California-based Palm advanced 1 7/8 to 36 3/4 while 3Com, also based in Santa Clara, rose 3 7/8 to 66 5/8. An average of 4.9 million Palm shares changed hands daily over the past three months. The analyst said Bethlehem, Pennsylvania-based Bethlehem Steel, which has a market value of $511 million, was one of 18 companies that could be removed from the index to make room for Palm. ``There are 18 stocks with a market cap of less than a billion,'' he said. ``Any of these would be a fine candidate to be kicked out of the index.''