Palm shares score big on Day One of offering

Hand-held organizer seen as future of PCs

Stocks

March 03, 2000|By BLOOMBERG NEWS

SANTA CLARA, Calif. -- Shares of Palm Inc., the hand-held organizer unit that 3Com Corp. is spinning off, more than doubled in first-day trading yesterday after a stock offering that riveted investors' attention for the past few weeks.

Palm shares climbed $57.0625 to $95.0625, after opening at $145 and rising as high as $165. The shares were sold at $38 each, raising $874 million. 3Com shares fell 21 percent. Before yesterday, they had more than doubled this year.

Investors are betting that Palm represents the future of the personal-computer industry because its pocket-size organizers provide wireless Internet connections, and cellular telephone makers, including Nokia Oyj, are licensing Palm software.

People are "convinced that PCs have had their time, that their golden age is over, that we're moving to an age of multiple Internet devices per consumer," said Tom Rhinelander, an analyst at Cambridge, Mass.-based Forrester Research Inc.

Fueling the surge is the scarcity of shares: Goldman, Sachs & Co. arranged for Palm to sell a 4.1 percent stake, the second-smallest percentage ever for a U.S. company, according to CommScan LLC.

"There are so many people out there shut out of this offering," said David Menlow, president of IPOfinancial.com, which tracks initial public offerings.

Palm's market value is about $53 billion, almost double 3Com's $28 billion, and larger than Ford Motor Co.'s $50 billion. It's not unheard of for a unit to have a larger market value than its parent: Internet-services provider Digex Inc. is valued at $9.1 billion, compared with $3.3 billion for parent Intermedia Communications Inc. IDT Corp., valued at $1.2 billion, has a controlling stake in Net2Phone Inc., valued at $2.9 billion.

As a stand-alone business, 3Com, the No. 2 maker of computer-networking equipment, might have a tougher time as it competes with Internet powerhouse Cisco Systems Inc. and No. 1 computer-chip maker Intel Corp.

Now that Palm trades separately, analysts said investors must re-evaluate its parent. 3Com shares fell $22.3125 to $81.8125. Investors in 3Com will get Palm shares when 3Com spins off its 95 percent stake in six months.

Palm has sold more than 5.5 million Palm organizers since they were introduced four years ago.

Consumers use a stylus to enter addresses and appointments on the organizer's liquid-crystal screen.

The organizers have gained a loyal following among executives and technophiles, who carry the units in leather cases and swap programs and information via infrared beams. The high-end $449 Palm VII provides wireless access to the Internet through the company's service.

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