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Palm outlook fuels rise in 3Com stock

SANTA CLARA, Calif. -- 3Com Corp. shares soared as much as 22 percent to a record on analyst predictions that stock in the company's Palm Inc. unit could triple when it starts trading tomorrow.

3Com rose 15 1/2 Wednesday to 113 1/2 in late-morning trading of 30.8 million shares. The stock traded as high as 119 3/4 and has gained about 71 percent in the past seven days.The Palm line is manufactured in Salt Lake City at a plant 3Com sold to contractor Manufacturers' Services Ltd. in 1999.

The company later Wednesday plans to sell 23 million Palm shares, or about a 4 percent stake, at $30 to $32 each, double the original price. Shares in the No. 1 hand-held organizer could open in the 70s and close around 100 Thursday, Lehman Brothers analyst Mark Sue said.

"This stock is certainly a blindfolded layup," said David Menlow, president of IPOfinancial.com, which tracks initial public offerings. "The enthusiasm might continue for quite some time."

3Com, the No. 2 computer-networking company behind Cisco Systems Inc., plans to spin off the remaining 94 to 95 percent stake in Palm to shareholders in six months.

The shares will trade under the symbol PALM on the Nasdaq Stock Market, after the sale led by Goldman, Sachs & Co. Bright Spot

3Com shares have quadrupled since Sept. 13, when the Santa Clara, Calif.-based company said it would make Palm an independent company.

Palm has gained a loyal following for its devices, which let consumers use a stylus to input addresses and appointments on a liquid-crystal screen. The units connect to a personal computer to exchange information and programs. More than 5.5 million Palm organizers have been sold in the four years since the first PalmPilot was introduced.

The surge was a turnaround for 3Com's shares, which slumped after the $7.3 billion takeover of U.S. Robotics Corp. -- including Palm, then called Palm Computing Inc. -- in June 1997. By last April, the stock had fallen more than three-quarters from a record set in December 1996. The drop occurred as the company dealt with slower-than-expected sales.