Palm line boosts 3Com's revenue base

The popular handhelds from 3Com's Palm Computing division are starting to make up a significant chunk of the networking company's revenue stream.

2 min read
Giving new weight to the struggling firm's business strategy, 3Com's Palm Computing line now makes up a significant chunk of the company's revenue stream.

Sales of PalmPilots represented 10 percent of 3Com's revenue in fiscal 1999--more than double year-ago levels--according to Securities and Exchange Commission documents.

In total, revenue from Palm handhelds increased 116 percent, to $569.9 million from $264.4 million last year. In 1997, Palm totaled $124.4 million, or 2 percent, of 3Com's total revenue.

Analysts say the sales numbers substantiate 3Com's new strategy of relying on its market-leading Palm device as a central piece of its business strategy.

"They're the dominant PDA [personal digital assistant] in a heavily growing market, but 3Com is struggling as a networking company to find where Palm fits in their overall strategy," said analyst Michael Wolf, of Cahners In-Stat Group.

"They have backbone switches, network interface cards and routers and all of a sudden you have this Palm, a funky little offshoot," he added.

3Com, which has struggled financially the past year, has focused on new emerging markets, such as its Palm line, and moved away from slow-growth technologies, such as analog modems and network interface cards.

While wildly popular among consumers, 3Com has worked hard in making PalmPilots essential for business users by making the devices an extension of the corporate network. For example, administrators can fix network problems with Palm devices and a wireless Internet connection.

Wolf believes PalmPilots will take off in the corporate sphere once most devices support wireless standards, which will allow different devices to communicate seamlessly.

"Laptops didn't enter the mainstream until you were able to hook them up to the network," Wolf said. "When PDAs can interface with different devices on the network and you can sync up wirelessly, more IS managers will support subsidizing PDAs for their road warriors."

3Com executives had previously declined to break out revenue data for its PalmPilot line. During a conference call with financial analysts in June, 3Com executives had said that Palm sales reached 10 percent of the company's overall revenue, but declined to give specific numbers.