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3Com unveils Palm stock plan

The company announces the long-awaited distribution plan for its Palm shares and a large stock buyback plan.

3Com today announced the long-awaited distribution plan for its Palm shares and a large stock buyback plan.

3Com shareholders will receive approximately 1.5 shares of handheld device maker Palm for each share of 3Com held. Shareholders of record July 11 will receive their Palm distribution July 27.

The networking company noted that the exact distribution ratio will depend on the number of 3Com shares outstanding July 11, however. The estimated 1.5-to-1 ratio is based on 351 million 3Com shares currently outstanding, but there are roughly 14 million options that can be exercised between now and the record date, which could slightly alter the final calculation.

If the distribution were made today, 3Com shareholders would receive Palm stock valued at $48.38, based on Palm's current price of $32.25. Palm shares ended the day up $1.06, or 3.4 percent, and remained virtually unchanged in after-hours trading.

Palm shares were priced at $38, more than double the price that was initially expected. At the end of their first day of public trading, they closed at $95.06, but they have slid steadily since.

3Com's shares ended today at $43.69, up 56 cents, or 1.3 percent. The announcement was made after the close of regular trading.

3Com's stock has taken a beating since the company spun off Palm in March; its current price is about 64 percent below the 52-week high of $119.75.

"We're pleased to confirm the distribution of our Palm holdings will occur more quickly than our previous estimates," Eric Benhamou, 3Com's chairman, said in a statement. "The establishment of two fully independent and publicly traded companies...will maximize both companies' focus and ability to strengthen their leadership in their respective markets."

The networking company also announced that it replaced its stock repurchase program with a plan that allows a share buyback of up to $1 billion. This new program is in addition to the $919.3 million the company already has spent since June 1998 in buying back its shares.

3Com will repurchase the shares based on several criteria, such as the company's stock price and market conditions.