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3Com tunes in to Net radio start-up for $80 million

The network equipment maker says it will acquire Kerbango, which has developed an Internet radio that will bring listeners more than 4,500 stations.

Making a steady move into the market for digital home appliances, network equipment maker 3Com today said it will acquire Internet radio pioneer Kerbango in a cash deal valued around $80 million.

With the acquisition, 3Com said it hopes to offer consumers a broader set of Internet devices by adding Kerbango's Internet radio products to its existing set of Internet connectivity devices for the digital home.

Kerbango, which was founded by former Apple Computer and Power Computing executives, has developed an Internet radio, a radio tuning system and a radio Web site.

The Internet radio is a device that looks like a radio but tunes in to audio from Web sites worldwide. The tuning system is a directory for Internet audio, and the radio Web site acts as a portal for Net radio stations. According to Kerbango, the radio can tune in to more than 4,500 stations. It is expected to sell for $300.

Under terms of the deal, Santa Clara, Calif.-based 3Com said it will acquire Kerbango's outstanding stock. The transaction is scheduled to close during 3Com's first quarter and will be accounted for as a purchase.

In the past year, 3Com has spun off Palm and its slow-growing analog modem business and has killed off its networking equipment arm for large businesses. The company is focusing on emerging markets, such as home networking, high-speed modems, wireless and Internet telephony. It is catering to small and midsized businesses, as well as to consumers in those markets--two areas the company has historically dominated.

A growing number of big-name high-tech companies such as Intel, Microsoft, Compaq Computer and others are betting the nascent market for so-called information appliances, such as those developed by Kerbango, will take off soon. A number of research firms are predicting the same thing.

International Data Corp. estimates the information appliance market will hit $17.8 billion by 2004.

Kerbango, which employs 28 people in its Cupertino, Calif., headquarters, said chief executive Jon Fitch will become vice president and general manager of the Internet Audio division at the close of the deal. Fitch will report to Julie Shimer, vice president and general manager of 3Com's Consumer Networks Business, the companies said in a statement.

3Com said it does not expect the Kerbango purchase to have a "material" effect on fiscal 2001 earnings results.