Shares of 3Com Corp. (Nasdaq: COMS) moved up 6 1/8, or 10 percent, to a 52-week high of 68 7/16 Monday on excitement surrounding the upcoming initial public offering of Palm Computing Inc., the network-equipment maker's popular hand-held computer.
In December, 3Com said it would sell 23 million shares in a projected range of $14 to $16 a share.
"Honestly, I think the run-up today is all about excitement for the Palm IPO," said Patrick Houghton, an analyst at Sutro & Co., in a prepared release. "I don't see anything fundamentally different today than two months ago."
Palm said in its SEC filing it will net $320.7 million from its IPO and will net another $225 million from private placements by America Online Inc. (NYSE: AOL), Motorola Inc. (NYSE: MOT) and Nokia Corp. (NYSE: NOK).
Goldman Sachs and Morgan Stanley Dean Witter are co-lead managers for the offering, which is expected to debut later this month.
After the offering, there will be about 570 million shares outstanding, putting Palm's initial market capitalization at about $8.55 billion based on a $15 per share initial price. Of that, 530 million shares will be held by 3Com, the filing said. The company plans to divest of its holdings within six months by distributing the shares to 3Com shareholders.
Palm said it would use proceeds from the offering to pay a dividend of at least $50 million to 3Com, repay debt to 3Com, boost spending to support growth in operations, infrastructure, and hardware and software. If net proceeds exceed $620 million, 3Com has the right to receive an extra 50 percent of the aggregate net proceeds in excess of the $620 million, the company said in its SEC filing.
The underwriters have been granted the option to purchase an extra 3.45 million shares in the event of heavy demand.
Last quarter, 3Com topped analysts' estimates, earning $131 million, or 37 cents a share, on sales of $1.48 billion.
First Call consensus expects it to earn 25 cents a share in the third quarter and $1.26 a share in the fiscal year.
Eighteen of the 28 analysts following the stock rate the stock a "hold," according to Zack's Investment Research Inc.