Shares of Palm Inc. nearly quadrupled in opening trading today on the Nasdaq Stock Market as investors flocked to the new public company for the popular handheld
electronic organizer line.
Palm, formerly a subsidiary of 3Com Corp., said Wednesday it
sold 23 million shares, or a 4.1 percent stake in the company, at
$38 apiece, raising $874 million. The per-share offer price came in
$6 above the high end of the previously announced $30-$32 range and
more than double the original pricing of $14-$16 a share.
Shares opened at $145 on the Nasdaq, but were trading slightly
lower at $134 in late morning trading.
The explosive growth of the Internet, and the drive to bring the
Web to people wherever they go, has made the Palm family of
handheld products the darling of the corporate set and is
increasingly catching the eyes of average consumers.
Palm has fended off competitors in the past four years and
stayed dominant by creating portable devices that are easy to use
and perform a few simple functions well, including scheduling,
keeping phone numbers and recognizing handwriting.
Palm today can lay claim to a dominant 75 percent of the market
for handheld units. And devices running on the Palm operating
system made up 91.1 percent of the handhelds sold in U.S. stores in
the fourth quarter of 1999, according to PC Data, a Reston,
Va.-based market research firm.
Even more important, Palm - unlike many other companies with
recent IPOs - is making money, with $23 million in profits on $435
million in sales in the six months ended Nov. 26.
Investors already have caused shares of 3Com, the No. 2 maker of
computer networking equipment behind Cisco Systems, to more than
double in the past month. The company, which will initially retain
ownership of 94.8 percent of Palm, plans to spin it off to
shareholders later this year.
3Com also sold another 5.9 million Palm shares directly to
corporate partners America Online Inc., Nokia and Motorola Inc.,
raising an additional $225 million.
The Palm IPO is intended to help fund its new strategy of
licensing out its operating system and letting other manufacturers
build the devices. Within two years, analysts project the company's
revenue from selling the Palm gadgets to be surpassed by revenue
from licensing fees from the operating system.
Both 3Com and Palm are based in Santa Clara.