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Wall Street Eagerly Awaits Next Week's Palm Inc. IPO

By David Armstrong   Fox Market Wire
The future could be in your hands. At least, that's what the folks at Palm Inc., hope.

The makers of the popular Palm series of sleek, hand-held organizers and computing devices are banking on the belief that soon you will never want to be without access to loads of information or the ability to use the Internet while sitting in a restaurant. And glancing at the financial performance of the 3Com subsidiary, as well as some recent strategic licensing deals, they just might be right.

Photo
AP
The new color Palm IIIc is the company's first color-screen version. Because the color screen drains batteries faster, the IIIc has a rechargeable battery pack built in.

There is much enthusiasm for the company as it nears its slated debut on Wall Street next week. On Monday, the company doubled its expected pricing level from $14 to $16, to $30 to $32. Palm could raise $736 million from the 23 million shares its selling at the higher price.

3Com still will be the dominant owner, retaining some 80 percent of the company after it goes public, with the option to distribute those shares to its own shareholders.

Part of the investor enthusiasm for Palm Inc., is based on sparkling financials. Revenues at Palm Inc. jumped from $1 million in 1995, to some $563.5 million in 1999. Last year, Palm Inc. posted a net income of almost $30 million.

Chances are, if you see someone tapping a little light pencil at a hand-held computer screen, it's a Palm device. The company has almost an almost 70 percent market share, according to International Data Corp.

But it's the potential of the market that will drive the stock's valuation. With all of the euphoria surrounding wireless information services, the market for easy-to-use personal computer devices and software applications is expected to run deep.

The company still is the dominant player in hand-held devices, commonly known as personal digital assistants or PDAs, but is facing increasing competition from devices powered by a version of Microsoft's popular Windows operating system.

Palm Inc. (formerly called Palm Computing) also finds itself competing against a new company founded by former Palm executives. Jeff Hawkins and Donna Dubinsky left the company last year, after they failed to convince 3Com head Eric Benhamou to move forward on spinning off the subsidiary. They have since founded Handspring, a company that has unveiled its own hand-held devices using the Palm operating system.

3Com wants to spin off its Palm subsidiary because doing so should unlock potential value in the company, as it attempts to play a major role in the wireless revolution.

 
'The company is betting that the future is not in gadgets, but in software'
 

"Everyone is expecting this to grow hugely and rapidly," said Carl Zetie with the Giga Information Group. "By spinning this off, they make the value visible to Wall Street."

On the gadget side, Palm Inc. recently debuted the Palm IIIc, their first device featuring full color display and boasting more efficient energy use. Perhaps more importantly, the company also unveiled a new unlimited wireless service for their Internet-readied Palm VII device, allowing users to users to access the Internet.

But the company is betting that the future is not in gadgets, but in software.

The company plans to push its "Palm platform," an operating system and related software applications. It hopes to turn the product into the dominant platform as wireless information services continue to grow.

The platform is praised for being easy to use and understand, a problem that has plagued Microsoft CE, another operating system for hand-held devices.

That means Palm Inc. is moving into a central position amid the wireless revolution, regardless of which device their system is running on.

To keep the momentum, the company struck several high-profile licensing deals in recent months with Nokia and Sony, each of which has agreed to use the Palm platform. In addition, Nokia has teamed up with America Online and Motorola to buy a 4.5 percent stake in the company when it comes to Wall Street.


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