Stock in 3Com's Palm unit blasted off Thursday, following an initial public offering in which its share price rose as high as $160 before leveling off by mid-afternoon at $101 per share, still a 167 percent gain.
Palm Inc.'s leading position in handheld computing devices and its strong sales drove intense interest in its IPO at a time when many publicly offered companies have little or no track record, analysts said.
In the days leading up to the IPO, 3Com adjusted the pre-offering price from $15 per share to $30 per share before settling on $38 late Wednesday.
Palm, formerly a wholly owned subsidiary of 3Com, is selling 23 million shares of common stock. After the sale, it will be a separate, publicly traded company, Palm said. After the offering, 3Com will still own about 95 percent of Palm, or 532 million shares.
Palm will also privately sell 2.1 million shares to America Online, 1.7 million to Motorola, and 2.1 million shares to Nokia, Palm said.
Palm held 66% of the U.S. market for handheld devices as of mid-1999, said Randy Giusto, an analyst with IDC. The company posted sales for the quarter ending Nov. 26, 1999, of $261 million, up 50% over the same quarter a year previous.
However, Palm is facing increasingly tough competition, Giusto said.
"They are a formidable force, but the market is going to get a lot more competitive in the next 12 to 24 months," Giusto said. Palm will have to compete with small computing devices that run Microsoft's Windows CE operating system and products from Casio Computer, Compaq and Hewlett-Packard, he said.
RELATED LINKS
AOL, Motorola, Nokia buy into Palm at IPO price
IDG News Service, 03/02/00.
The wireless Web: A reality check
PC World, 03/02/00.
