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3Com To Spin Off Palm Division

3Com said it plans to spin off its Palm Computing Division, maker of the PalmPilot family of handheld PCs, in an initial public offering, creating the first independent and publicly traded handheld PC company.

In making the announcement, 3Com chairman and CEO Eric Benhamou said the time is right to spin off the Palm division as a separate company as the “multi-billion dollar Palm economy” is about to enter a new phase. Where most revenue today is from actual Palm sales, future revenue for 3Com will derive from licensing the Palm operating system, creating wireless Internet services and portal sites to “enable a new community of handheld users to access information and commercial services,” and building enterprise solutions.

To capitalize on the emerging handheld opportunities, Benhamou said Palm required a “greater management bandwidth,” including its own CEO, CFO and board of directors.

An IPO is expected to take place in January. The company has already appointed two board members, Jim Barksdale, former CEO of Netscape, and Gordon Campbell, president and chairman of Techfarm. A search is currently underway for a CEO.

Diana Hwang, Mobile Research Manager for International Data Corp., Framingham, Mass., said the spin off “makes sense” and has been speculated about for a while. “Ever since 3Com bought US Robotics, people wondered what they would do with Palm because it doesn’t fit into their strategy,” Hwang said. “Its good for 3Com to focus on their core networking business and it really frees up resources for the Palm.”

There are currently five million Palm users, according to 3Com.