MIK 0.00% 1.5¢ mikoh corporation limited

3com has its own problems

  1. 150 Posts.
    Fell 23%+ overnight...

    "The company went public in 1984, and its market value peaked at $25.8 billion in 2000. The shares fell from a split-adjusted record of $21.89 in March 2000 to $2.96 in April 2005..."

    Current mkt cap around $1.15bn...


    3Com Falls as Bain Drops Request for Approval

    By Jason Kelly and Amy Thomson

    Feb. 20 (Bloomberg) -- 3Com Corp., preparing to be acquired by Bain Capital LLC, fell the most in seven years after its buyers failed to settle national-security concerns with the U.S. government, putting the $2.2 billion deal in doubt.

    Bain and Chinese partner Huawei Technologies Co. withdrew their application to the Committee on Foreign Investment in the United States. The panel had expressed concerns about 3Com's TippingPoint unit, whose security software is used by U.S. government agencies, falling into Chinese hands. A congressional committee is investigating the deal.

    3Com must now weigh whether to separate TippingPoint, which brought in about 8.1 percent of the company's sales last quarter, and renegotiate the transaction, or stay independent as the economy cools and customers cut purchases.

    ``This is China, and it's a hot topic right now and it will remain a hot topic as long as the administration complains openly about Chinese espionage,'' said attorney Charles R. Johnston, chairman of the international transactions group at Baker, Donelson, Bearman, Caldwell & Berkowitz in Washington.

    3Com, which also makes computer-network devices, fell 86 cents, or 23 percent, to $2.87 at 4 p.m. New York time in Nasdaq Stock Market trading, the steepest drop since December 2000.

    Under the original terms of the transaction, Huawei would get a 16.5 percent stake in 3Com, while Bain would own the rest.

    `Very Disappointed'

    ``We are very disappointed that we were unable to reach a mitigation agreement with CFIUS for this transaction,'' Edgar Masri, Marlborough, Massachusetts-based 3Com's chief executive officer, said in a statement today. 3Com and the buyers ``remain committed to continuing discussions.''

    3Com spokesman Kevin Flanagan didn't return a call seeking further comment. Bain spokesman Alex Stanton declined to comment.

    The government has ``worked hard'' to encourage international investment in U.S. companies while still protecting national security, said Brookly McLaughlin, a spokeswoman for the Treasury Department, which chairs the committee. The 12-agency panel will monitor the companies ``appropriately'' as they move forward, she said.

    If the deal falls through, it would add to the list of private-equity buyouts that have foundered amid fears of a recession and limited access to debt financing. Before today, 3Com was trading about 42 percent below Boston-based Bain's $5.30-a-share bid.

    Bain said Feb. 12 that it was willing to make concessions to win government approval, which some analysts say may have to include getting rid of TippingPoint.

    `No Way Around It'

    ``They have to sell the division, there's no way around it,'' said Morningstar Inc. analyst Alex Dannin, who is based in Chicago and doesn't own the shares. ``It sounds like Bain still wants to go through with it.''

    Eight Republicans, led by Florida Representative Ileana Ros- Lehtinen, the top Republican on the House Foreign Affairs Committee, had proposed legislation urging the Bush administration to block the sale.

    Lobbyists said the move today could provoke a backlash from China, which also saw a bid by Chinese-owned Cnooc Ltd. to buy El Segundo, California-based Unocal Corp. in 2005 implode after widespread criticism by U.S. lawmakers.

    ``China will react negatively, they always do,'' said William Reinsch, president of the National Foreign Trade Council and a member of the U.S.-China Economic and Security Review Commission. ``But they are already aware that this has become a sensitive issue.''

    50-50 Chance

    There's still a 50-50 chance that Bain will rework the deal and resubmit it to the government for approval, Reinsch said. ``I wouldn't say this is the end of the story.''

    Neither Reinsch nor Johnston's law firm represents or advises parties to the proposed sale.

    Robert Metcalfe, who invented the Ethernet technology that is now the standard for personal-computer networks, founded 3Com in 1979. 3Com merged in 1987 with Bridge Communications, co- founded by Eric Benhamou, now 3Com's chairman.

    The company went public in 1984, and its market value peaked at $25.8 billion in 2000. The shares fell from a split-adjusted record of $21.89 in March 2000 to $2.96 in April 2005 after the Internet bubble burst and customers cut spending. 3Com shed its Palm electronic-organizer business in 2000.

    The company's largest business, which makes equipment for transmitting Internet signals, had 2.7 percent of the market in the fourth quarter of 2007, according to a survey by telecommunications researcher Dell'Oro Group. Rival Cisco Systems Inc. had 70.6 percent, while Hewlett-Packard Co. and Nortel Networks Corp. each had less than 5 percent.

    Bain told 3Com last year that it would value the company at $4.50 to $5 a share without TippingPoint, according to a filing yesterday with the U.S. Securities and Exchange Commission.

    Huawei, based in Shenzhen, China, was founded by Ren Zhengfei, a former army officer.
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