3COM Announces Plan to Build Two Distinct Leadership Companies in Networking and Handheld Computing

Business Wire, Sept 13, 1999

SANTA CLARA, Calif.--(BUSINESS WIRE)--Sept. 13, 1999--

Palm Computing to Become the Handheld Computing

Industry's First Public Company

3Com Corporation Chairman and Chief Executive Officer Eric Benhamou (Nasdaq: COMS) today announced plans to build two distinct leadership companies by making its highly successful Palm Computing subsidiary an independent publicly traded company. This new structure will enable 3Com and Palm to build on their market leadership positions in networking and handheld computing by allowing each company to independently focus on growth opportunities in the most promising markets.

"Creating the industry's first independent, publicly-traded handheld computing company is a significant milestone, reflecting both the current success and the future potential of our Palm business," said Mr. Benhamou. "Further, the formation of two distinct companies, each with greater flexibility, agility and focus, is expected to create more value for our shareholders, customers and employees."

Within the handheld computing arena, significant new growth opportunities are developing that Palm, as a separate company, can capitalize on to create an entire new industry. Palm is uniquely positioned to aggressively drive a number of emerging strategic market segments including 1) handheld operating system licensing, 2) enterprise computing solutions, 3) wireline and wireless Internet services, 4) portal sites and 5) Palm-branded devices.

3Com's Palm business has expanded rapidly to become the world's leading handheld computing platform with over five million customers using Palm devices for an increasing array of business and consumer applications. This unprecedented market acceptance has created an emerging multi-billion dollar Palm Economy, which is no longer only based on the popular Palm family of handheld computing devices, but also embraces independent software developers, operating system licensees, strategic alliance partners and hardware OEMs. Palm will be better able to lead and grow the Palm Economy as an independent company with investors, partners and licensees distinct and separate from 3Com.

This restructuring will allow 3Com to be focused exclusively on building on its networking connectivity and infrastructure strengths to deliver the next wave of connectivity by creating networks, Internet products and services that let people access and utilize information in new and innovative ways. 3Com remains committed to achieve breakthroughs in simplicity, availability and convergence in its networking systems and connectivity businesses.

3Com also is reinforcing its commitment to market leadership and shareholder value creation through focused management, technology development and investment strategies, and aggressive marketing programs. Further, the company will have the flexibility to cement new strategic alliances and partnerships in support of its user-centric networking strategy. Networking is a rapidly expanding industry, with annual sales expected to surpass US$50 billion by the end of the decade.

Mr. Benhamou also said that 3Com will be a licensee of Palm's technology and will continue to support the growth of the Palm Economy. Additionally, each company can further extend the exceptional leadership position of its respective brand.

3Com will make an initial public offering (IPO) for its Palm Computing subsidiary early next year, and intends to subsequently spin-off the balance of the shares of the new publicly traded company to 3Com shareholders. Under this plan 3Com shareholders will ultimately own shares in both companies.

Additionally, 3Com directors James L. Barksdale, managing partner of the Barksdale Group and former CEO of Netscape, and Gordon A. Campbell, president and chairman of Techfarm, Inc., will move to Palm's Board of Directors. Other board and executive management decisions will be announced prior to the filing of an IPO registration statement with the Securities and Exchange Commission.

About Palm Computing

With fiscal 1999 sales of $570 million, the Palm business represented approximately 10 percent of 3Com's total fiscal 1999 sales. Revenues have more than doubled annually and the business has been expanded to include new markets for software licensing and Internet services. With more than four million Palm handheld computers in the market, Palm is the worldwide market leader with products that include the best-selling Palm III(TM), Palm V(TM) and Palm VII(TM) series of handheld computers. Worldwide market share leadership is 68 percent. (1)

The Palm operating system platform, which consists of three primary components: the Palm OS(R) operating system, the HotSync(R) data synchronization technology; and the software interface capabilities to support hardware add-ons, has become the industry standard for information management. With approximately 20,000 developers creating hardware and software products based on the Palm operating system platform, it is the foundation for not only the market leading Palm devices but also products from Palm's strategic partners such as IBM, Qualcomm, Franklin Covey, Handspring and Symbol Technologies. Other global alliance partners include Oracle, SAP, Computer Associates, Sybase, Lotus, AOL, Sun and Remedy.