3Com plans TippingPoint IPO

3Com announced its intention to purchase TippingPoint, based in Austin, Texas, in December, 2004.

Marlborough, Mass.-based 3Com said that it intends to remain TippingPoint’s majority shareholder following the IPS, but will eventually reduce its ownership.

Edgar Masri, 3Com’s president and chief executive officer, said in a statement that the move will help to bring both companies back to basics.

"We believe this move will enable 3Com and TippingPoint to focus on their core strengths, target markets and strategic goals," he said. "The decision to IPO TippingPoint enables 3Com to focus more closely on its core business – delivering integrated, secure, converged network infrastructure solutions to enterprises and increasing H3C sales worldwide."

TippingPoint spokeswoman Abbey Green told SCMagazine.com today that she could not comment on the IPO due to Securities and Exchange Commission regulations. A 3Com spokesperson could not immediately be reached for comment.



3Com lost US$66.2 million, 17 cents per share, in the fourth quarter, partially due to US$63 million in expenses related to its joint venture project with Huawei. The company lost $15.2 million, or 4 cents, in the same period a year before.

In its acquisition of TippingPoint, finalised in 2005, 3Com paid US$47 per share of all outstanding TippingPoint stock.

Asked if 3Com regrets the TippingPoint acquisition, Mike Rothman, president of analyst firm Security Incite, told SCMagazine.com that he’s "not sure regret is the right term, but it was an expensive deal back then and the synergies never developed. So moving in this direction of spinning off TippingPoint to its shareholders is the right idea."

"The rationale is very similar to the EMC/VMWare IPO. The parent company doesn’t believe it is getting the value [in terms of its own market cap] relative to what the faster growth and more ‘strategic’ entity is.

So 3Com is figuring (that) getting a standalone valuation on the TippingPoint operation will result in a positive bump in their market cap," he said.

"TippingPoint isn’t hemorrhaging money like the rest of 3Com, so the idea is to get that business value on its own merits, like 3Com’s."