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3Com OKs final distribution of Palm shares

The handheld computing company's stock shoots up nearly 30 percent after its former parent company decides on the final formula for the distribution of shares.

Palm shares soared nearly 30 percent today after 3Com, its former parent company, announced the final distribution formula for the spinoff of Palm's shares.

Palm was created as a 3Com subsidiary in a February IPO that raised more than $800 million for Palm. Under the terms of the ratio announced today, 3Com shareholders will receive 1.484 shares of Palm for each share of 3Com they own. 3Com shareholders were eagerly awaiting the news.

Shares of the handheld computing leader shot up on the news. Palm, which has been hovering in the $25 to $35 range since its February IPO, moved up nearly 10 points to just over $46. By market close, the stock had settled back down to $45.44--a 24 percent gain.

3Com's stock also zipped ahead, closing up nearly 15 percent to $73.63.

Palm shares had skyrocketed on the first day of trading, up to $165, only to sink below $30 amid news of component shortages that would affect unit shipments and product availability.

"The distribution of Palm completes the commitment we made last September to create two independent leadership companies in the field of handheld computing and networking," Eric Benhamou, chairman of 3Com and Palm, said in a statement. "We are pleased to have reached this milestone earlier than anticipated."

Both companies are based in Santa Clara, Calif.

The final ratio was calculated by taking the total number of Palm shares owned by 3Com and dividing it by the number of 3Com common stock outstanding on Tuesday, according to 3Com.

3Com shareholders as see Q&A: 3Com president predicts company revival of July 27 will receive Palm shares, the companies said. 3Com stock options held by Palm employees will be converted to Palm shares.

Palm is the leading maker of handheld computers, with about three-quarters of the market. The company competes against devices based on Microsoft's Pocket PC operating system, as well as products that license the Palm operating system, including Handspring and Sony.

Sony showed off its Palm-based device this week, set to be released in Japan and the United States this fall.