At 51 years of age, Carl Yankowski has taken a path to his current job, CEO of

Palm

(PALM)

, which would make most job-hopping dot-commers in their 20s and 30s look downright moss-encrusted.

Yankowski rolled into the top job at the maker of handheld devices just moments before its initial public offering in March, after a career in technology and marketing positions at

Procter & Gamble

(PG) - Get Report

,

Memorex

,

Pepsico

(PEP) - Get Report

,

General Electric

(GE) - Get Report

,

Cadbury Schweppes

(CSG)

,

Sony

(SNE) - Get Report

and

Reebok International

(RBK)

.

Now Yankowski is set to take another kind of journey: navigating Palm parent

3Com's

(COMS)

distribution of 94% of Palm's shares, the portion the network-equipment maker still owns. Because investors are awarding almost no value to 3Com other than the cash on its balance sheet, the pattern between now and the July 27 distribution almost certainly will be further erosion of Palm's shares (which closed Monday at 28 1/16, off their high of 165) and commensurate gains in 3Com, which stands at 49 5/16, down from its 52-week high of 119 3/4.

And when that financial event is all over, the well-traveled CEO will be forced to turn his attention once again to the panoply of challenges facing the undisputed leader in handheld devices. (Yankowski literally gets around: He belongs to 23 flying clubs around the world where he has plane-borrowing privileges.)

The competitive challenges facing Palm are numerous, from encroachment from competitors (and licensees) like

Handspring

TST Recommends

and Sony, to the need to deliver on its promise to be an all-wireless company by year-end.

First, though, comes Wall Street's potentially painful digestion of the 532 million shares 3Com will feed to the market. Because of Palm's tiny float -- 26.5 million of 564.5 million shares outstanding -- investors haven't been able to place big bets against the richly valued company. Even at today's depressed levels, Palm still trades on a price-to-sales basis of a wireless-device company, a status it enjoys only in its press releases.

What's more, with 3Com shareholders set to receive 1.48 shares of Palm on July 27 for each 3Com share they hold on July 11, investors are valuing 3Com at about nothing. (The math: Palm shares at $28.06 times 1.48 plus $8 in 3Com cash equals $49.53; Shares of 3Com closed Monday at 49 5/16.)

Says Paul Sagawa, an analyst with

Sanford Bernstein

in New York: "The difference between the two will have to correlate by July 11. It will correlate in some combination of Palm going down and 3Com going up."

So what's a 3Com shareholder to do? Because he thinks Palm shares eventually are worth 40 on a fundamental basis and because an investor must hold 3Com shares on July 11 to get the distribution (or purchase the shares on the open market from someone who did), Sagawa advises investors to hold on to 3Com, which he sees dropping to about 15 after the distribution takes place. Between July 11 and July 27, the value of 3Com's shares -- minus Palm -- will be reflected in an "ex-dividend" class of stock with the symbol COMS V. 3Com maintains a

primer on the complexities of the distribution on its Web site.

Obviously, Palm would have to fall for 3Com to be worth 15. If the company's future is bright, it looks like there are opportunities to get in at a lower level. Sagawa rates Palm and 3Com outperform, the highest rating at Sanford Bernstein. (Because it does no underwriting, Sanford Bernstein employs some of the least-conflicted analysts on Wall Street).

Sagawa, Yankowski and others believe there is plenty to like at Palm if it can live up to its hype. Even at its current valuation -- about nine times

Merrill Lynch

analyst William Crawford's calendar 2001 revenue projection of $1.8 billion -- Palm trades at a discount to potential wireless competitors

Research in Motion

(RIMM)

and

Phone.com

(PHCM)

. And because Palm has a commanding 70%-plus share of the market for handheld hardware, "Palm stands a greater chance of being a standard-setting platform than the others," says Sagawa.

CEO Yankowski dismisses RIM -- maker of the RIM pager and its Blackberry service -- as a "very excellent limited application" and a "one-trick company." But he is far from fulfilling his pledge of making every Palm device a wireless toy by year-end. Without the wireless cachet, Palm is just another nicely profitable hardware maker.

What if Palm can't make the wireless leap and gets stuck in the hardware world? Then its stock is really in for a jolt. Apply the multiple of 49 times forward earnings that

Dell Computer

(DELL) - Get Report

enjoys to forecasts of Palm's earnings next year and add in its billion dollars in cash and one gets a stock price of 6. Of course, Palm's revenue is doubling year over year and Dell's is growing in the 30% range, but you get the idea. Already, add-ons are available to make Palms wireless, but sleek Palm Vs currently make up more than 50% of sales. Unlike the Palm VII, the Palm V doesn't come with a wireless modem.

The other opportunity in front of Palm is to boost its licensing of the Palm operating system. Licensees currently include Handspring (set to go public itself shortly) and Sony, which plans to offer a handheld device later this year. Yankowski predicts that two to three years out licensing and Internet services could account for 25% of Palm's revenue. Although licensing gross margins are about twice the low-40% gross margin of devices, the company collects about $15 for a license, compared with $200 for a handheld computer.

"If the company switches revenue models, I don't think that's what the Street has in terms of revenue growth," warns Crawford, the analyst with Merrill Lynch (a Palm underwriter), who rates the stock accumulate in the intermediate term and a buy in the long term. Crawford notes that "there's so much coming into the market that is a complete unknown. Still, I would bet Palm will be among the winners."

The biggest unknown, of course, is how investors will handle the hundreds of millions of Palm shares that will flood the market. To educate those investors, Palm executives will hit the road in mid-July to talk up the company.

Yankowski says his newly installed management team recently completed Palm's first-ever three-year plan, the details of which he declined to divulge.

First Palm's got to get through the next three to six weeks.

Adam Lashinsky's column appears Tuesdays, Wednesdays and Fridays. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Lashinsky writes a column for Fortune called the Wired Investor, and is a frequent commentator on public radio's Marketplace program. He welcomes your feedback at

alashinsky@thestreet.com.

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