3Com Shares Hit a Price High as IPO for Palm Inc. Nears

Shares of 3Com Corp., the No. 2 maker of computer networking equipment, climbed 6.9% on Thursday to a record amid rising enthusiasm for next week’s initial public offering of shares in its Palm Inc. unit.

3Com rose $5.38 to $83, surpassing the previous high of $80.13 on Dec. 9, 1996. The stock traded as low as 20 in April 1999. Shares of Santa Clara, Calif.-based 3Com have tripled since it unveiled plans for the Palm IPO and spinoff in September.

The company’s 1997 acquisition of modem maker U.S. Robotics Corp. has dragged down 3Com’s shares for three years, saddling it with slower-than-expected sales, inventory backups and falling prices. Now, investors are focusing on Palm, the No. 1 maker of electronic organizers, which 3Com also got when it bought U.S. Robotics.

“It’s going to be a hot deal,” said Bill Becklean, an analyst at Suntrust Equitable Securities in Boston, who rates 3Com a “buy.” About $20 billion of 3Com’s $28.4-billion market value is coming from Palm, he said.

Palm is the only one of 3Com’s three product groups in which sales rose in the most recent quarter. Revenue in the unit rose 77% to $261 million as 3Com’s total revenue fell 4.3% to $1.47 billion.

Investors want a piece of 3Com so they can get shares of Palm when 3Com spins off the unit in about six months. Palm hopes to raise $368 million through the offering.

This week, Palm introduced its first organizer with a color screen, betting customers will pay more for the option.