3Com Soars as Investors Await Palm Computing IPO

Also Motorola, AOL and Nokia will take stakes in Palm.
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3Com

(COMS)

saw its stock climb Tuesday as investors eagerly anticipated an initial public offering of the company's

Palm Computing

subsidiary.

Adding to Wall Street's enthusiasm was the disclosure Tuesday that

Motorola

(MOT)

,

America Online

(AOL)

and Finland's

Nokia

(NOK) - Get Report

would each take a minority stake in Palm, which makes the handheld

Palm Pilot

computer device.

Motorola and AOL will also license Palm Computing technology. Motorola will use the technology in its wireless products and AOL will offer its service on Palm products.

3Com continued to power upward, rising 4 5/8, or 10%, to 49 3/8 by midafternoon. The stock was trading around 30 just over a month ago. (3Com ended up 5 13/16, or 13%, to 50 5/8.)

Late Monday, 3Com, a computer-networking equipment company, said it had filed a registration statement with the

Securities and Exchange Commission

to take its Palm Computing subsidiary public early next year, offering less than 20% of the company's common stock.

According to the offering's prospectus, the three companies will invest as much as $225 million to buy the stock in private placements and take as much as a 4.5% total stake. "This suggests a stronger commitment to the Palm operating system platform," said analyst Erik Suppiger of

Chase H&Q

. He rates 3Com a market perform and his firm has done no underwriting for the company.

The licensing deal with Palm fits into Motorola's strategy of delivering wireless Internet services. The company, based in Schaumburg, Ill., is a leading cellular phone manufacturer.

Despite interest in the deal, Motorola shares were down 5 3/16, or 4%, to 123 3/8, AOL was down 3 5/8, or 4%, at 90 3/8 and Nokia was down 6 1/16, or 4%, to 161 1/8. (Motorola ended down 9 11/16, or 8%, to 118 7/8; AOL finished down 5 1/2, or 6%, to 88 1/2; and Nokia closed down 7 9/16, or 5%, to 159 1/2.)

The underwriting of Palm Computing's IPO will be led by

Goldman Sachs

and

Morgan Stanley Dean Witter

.

Merrill Lynch

and

Robertson Stephens

will also underwrite the deal. No further details of the initial public offering were available.