Want Stock Options? Tell It to the Palm

3Com loses the head of its Palm Computing division to a juicy, IPO-bound start-up. Also, an item from the Earth-to-analysts file.
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The departure of Robin Abrams as president of 3Com's (COMS) Palm Computing division for Internet start-up Chemdex sends at least two messages. One is for investors in 3Com, and the other is for employers and employees trying to understand their roles in the new economy.

Regarding 3Com, the Santa Clara, Calif.-based networking products company apparently is hell-bent on keeping Palm within the fold, rather than spinning it out to shareholders, a move that could unlock the value of one of the hottest companies in the land. As for the personnel matters, Abrams' departure is perhaps the clearest indication to date that the allure of wampum (read: pre-IPO stock options) is stronger than almost anything and that there is absolutely no shame anymore in leaving a job shortly after taking it.

Abrams is the former

Hewlett-Packard

(HWP)

and

Apple Computer

(AAPL) - Get Report

executive who, in February -- that's five months ago, I used my fingers -- replaced Palm CEO Donna Dubinsky as head of the outrageously successful 3Com unit. Abrams bailed at the end of the month to join Chemdex, an Internet distributor of laboratory supplies based in Palo Alto, Calif.

Palm is about all 3Com has going for it right now. The maker of handheld organizers succeeded in recharging a segment of computing that had been given up for dead. Palm now accounts for about 10% of 3Coms' overall revenue and is doubling its sales annually. It's also a business partner of

TheStreet.com

(TSCM)

, which supplies news to the new Palm VII.

But with Abrams having made for the exits so soon, it's clear that 3Com CEO Eric Benhamou intends to hold onto Palm, a consumer electronics company appended to a communications equipment giant. He has since maintained that position since acquiring Palm in the purchase of

U.S. Robotics

in 1997.

"Eric just had no interest in

a spinoff whatever," says Dubinsky, now CEO of Palm licensee

Handspring

, who left Palm about a year ago. "At that time he was very committed to making Palm a very successful division in a very big company."

A spokeswoman for 3Com didn't respond to a phone call.

It's not a given that Palm should be broken away from 3Com. What's plain to see, though, is that 3Com will have trouble keeping employees if its stock stays stalled in the mid 20s, about where it was in late 1994.

And that gets to why Abrams left. On the face of it, it's a no-brainer. According to Chemdex's amended IPO filing with the

Securities and Exchange Commission

, Abrams gets an annual salary of $300,000, a signing bonus of $50,000, $20,000 quarterly bonuses for meeting unnamed performance goals AND ... 250,000 options to buy Chemdex shares at $10 each. (In the timing-is-everything department, new Chief Financial Officer James Stewart got 225,000 options with a strike price of $1.50 in February, when the company's IPO likely was just an idea.)

Also, Abrams and at least eight other Chemdex executives have so-called double-trigger change-of-control accelerated vesting provisions. Translation: If Chemdex gets bought out

and

Abrams gets fired, all her options vest immediately. That's a sweet provision, given how many Internet start-ups eventually are acquired.

So it's easy to understand why Abrams bolted. The real question is why she joined 3Com in the first place. Isn't anyone in Silicon Valley the least bit embarrassed to be thought of as a job hopper? (Full disclosure: I was employed by the

San Jose Mercury News

for 23 months before joining

TheStreet.com

.)

Abrams hid behind Chemdex's quiet period before the IPO when declining an interview. She can tell her side in this space whenever she's ready.

Sign of the Times

You know we live in extraordinary times when an analyst following a basket of Internet commerce companies refers to the "modest" gains of 7.1% for this sector in the month of June. Earth to Bill Burnham, e-commerce guru for

Credit Suisse First Boston

: An annualized return of 85% is not "modest."

Burnham, a savvy observer and promoter of the e-commerce "space," begs to differ.

"Relative to what it usually does, that's modest. Trust me," says Burnham, adding that his

Electronic Commerce

index, which includes June winners

VeriSign

(VRSN) - Get Report

and

Broadvision

(BVSN) - Get Report

, and losers like

Checkfree Holdings

(CKFR)

and

Wave Systems

(WAVX)

-- frequently rises or plummets 20% to 30% in a month. "Anything less than 10%, plus or minus, is below the noise level."

And people wonder if investors have gotten unrealistic expectations about investing in tech stocks.

Why eBay's Still Bulletproof

I wondered two things Thursday about the

Wall Street Journal's

well-researched piece on short-sellers' perspective on

eBay

(EBAY) - Get Report

. First, what took them so long to air the views eBay's detractors have been peddling for months? And second, would the article hurt the stock?

Can't answer the first question, but the second seems to be a resounding "no." eBay's shares fell all of 3% Thursday to 134 3/16. That's $100 less than eBay's high, but more than 22 times eBay's split-adjusted IPO price. And remember, despite the

Journal's

assertion that "eBay's profitability has long set it apart from its Internet peers." Long? eBay went public last September, not yet a year ago.

In that year, two interactions with short-sellers stand out. One was a guy at a party last November at the

American Electronics Association

investment conference in San Diego who told me about his boss who had shorted eBay from a split-adjusted 6 to about 44. The boss wasn't giving up. The other memory is of shorts noting that the number of eBay's auctions were declining around Christmas. The company said the decline was expected and that auctions would roar back. They did.

Is it possible eBay will sacrifice its operating profits to boost its technology? Sure. Will competition from

Yahoo

(YHOO)

,

Amazon

(AMZN) - Get Report

and others eventually take a toll? Perhaps. Will eBay's die-hard investors/fans give up easily?

Nope.

Adam Lashinsky's column appears Mondays, 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 monthly 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.