3Com Sets Palm IPO and Steps Up China Investments
By Cindy Christ

The nation's No. 2 networking firm 3Com (COMS) said Wednesday it would spin off its palm computing business in February 2000.

Speaking to reporters in Beijing, Matthew Kapp, president of 3Com Asia Pacific said that the IPO will transform the palm business into a "pureplay" position for investors and allow 3Com to focus on its networking operation.

The company also announced that former Sony executive Carl Yankowski would lead its Palm Computing division.

In related news, 3Com said it inked a pact Thursday with China's Taiji Computer Corp. to design, build and market network equipment in China. The company said it would invest $10 million for a 60 percent stake in the alliance as part of a plan to grow its network business there by more than 30 percent annually.

"We planned on looking at a $100-million investment over a two-year period starting 12 months ago," Kapp told reporters.

Kapp said 3Com's market share for routers in China is about nine percent and that the company aims to double that over the next 12 to 18 months.

This agreement brings the number of Asian manufacturing facilities for Santa Clara, Calif.- based 3Com to two. Last year, the company opened a site in Singapore.

Networking companies like 3Com and industry leader Cisco Systems (CSCO) supply key equipment needed to build out the Internet.

Analysts say that Internet service is limited in Japan because of high cost of service. But local media reported Thursday that the Nippon Telegraph and Telephone Corp. (NTT), Japan's state-run telecommunications firm, was close to reaching a deal with Internet Service Providers to lower the cost, which now averages about 8,000 yen per month, or around $78.

Experts say that lower prices will touch off feverish competition for Japanese Internet subscribers, but that the cost needs to drop below 5,000 yen, or around $49, to accelerate uptake among consumers.

Anticipating big growth in Internet users in Japan, American companies are hustling for a foothold in the Asian market, which lags well behind the U.S. in consumer Web use and e-commerce development.

In November 3Com said it also was working on Internet deals with Cable & Wireless, Singapore Telecommunications and other Asian firms.

Investors responded positively to the news. Shares of COMS closed up $2.06, or 4.8 percent, at $44.88.