Palm repriced its shares at $38 yesterday, more than double the price that was initially expected.
Palm's lead in the handheld market, coupled with its profitable performance and position in the hot wireless sector, has driven investor interest in the offering. Palm products account for roughly three out of every four handheld devices sold, according to market research information.
The company is looking forward to the age of wireless devices and Internet-enabled cell phones, and has inked a number of deals to put its software on these devices. Palm devices are expected to eventually be eclipsed in popularity by these wireless products, but analysts and investors have generally been reassured by the company's long-term view and strategic positioning.
ABN Amro initiated coverage of Palm, rating it a "buy" and setting a target price of $90 per share. In expectation of the IPO, parent company 3Com has so far been the most heavily traded company on the Nasdaq today.
As with any high-profile offering, however, Palm may not maintain any lofty heights achieved today, analysts say. "The question is, where does it go from here?" said Richard Peterson, an IPO analyst with Thomson Financial Securities Data, comparing Palm to VA Linux, a company which was up 600 percent on its first day but is now trading 50 percent lower.
"Palm is probably in a better position because they have sales and earnings and a big corporate backer," Peterson said. "VA Linux was a stand-alone. Theglobe.com was a stand-alone."
The handheld device company, which will trade under the ticker "PALM," raised $874 million through the IPO, excluding underwriting fees and other costs. That makes it the third-largest technology IPO ever.
Palm also may raise another $131 million--putting the value of the IPO at more than $1 billion--if it sells an additional 3.45 million shares to the underwriters to cover over-allotments.
Motorola purchased 1.7 million Palm shares yesterday at the initial $38 price. America Online and Nokia each purchased 2.1 million shares, according to Palm.
Earlier this week, Palm essentially doubled its pricing range to $30 to $32 a share from its initial range of $14 to $16 a share. That placed Palm among a small group of companies whose IPOs garnered enough interest to take such a bold step. VA Linux, the top first-day gainer of all time, also had doubled its range as it prepared to debut. VA's initial gain, however, has subsided.
Jeff Hirschkorn, a senior analyst with IPO.com, said he wouldn't be surprised if Palm reaches $300 a share when it begins trading. Others, however, are pegging a first-day close in the $120 to $140 range.
Palm's debut may be tempered somewhat by a security patent infringement lawsuit filed by E-Pass Technologies. Analysts, however, question the timing of the suit and merits of the allegations.
More problematic to some analysts are the logistics of the company's transition from hardware manufacturer to software and technology licensing firm. Although Palm can rely on guaranteed long-term revenues from licensing fees, hardware sales provide higher up-front profits. In addition, Palm's role as hardware manufacturer may present some conflicts with its licensees, including start-up Handspring and Sony, which is expected to release its own Palm device later this year.
"Palm sees itself as the head church, with many satellite churches," said Richard Doherty of The Envisioneering Group, explaining that the success of the licensees will contribute to Palm's overall success.
Palm, once it's spun off from networking company 3Com, will have an initial market capitalization of $21.4 billion, based on its 562.3 million shares outstanding. That's about two-thirds of 3Com's market capitalization of $35.6 billion. However, if Palm hits $70 per share today, analysts note, it will have the same market capitalization as parent company 3Com.
After today's sale, 3Com will hold a 94.8 percent stake in Palm, which it is planning to later divest. The networking company plans to give its shareholders the Palm stock as a dividend.
3Com again hit a record high yesterday, up over 10 points to 115. The company was most heavily traded issue in early trading. The shares have quadrupled since it announced Palm's IPO plans last September.
"Palm's one of the real drivers of 3Com stock," said IPO.com's Hirschcorn. "The PalmPilot is a big part of 3Com."
News.com's Michael Kanellos contributed to this story.
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