Thursday, December 16, 2004

3Com buys Tipping Point

3Com (COMS) yesterday bought intrusion detection/prevention devices maker Tipping Point Technology. While 3Com's move is in the right direction, they grossly overpaid for this purchase given that Tipping Point shares were near 52-week highs after a big runup over the last year, and 3Com still paid a decent premium.

This is a real waste of 3Com's cash pile. There were other undervalued/cheap players they could have bought that would have provided more bang for the buck. With this buy 3Com has really shown a complete disregard for shareholder value creation. The market seems to think likewise, sending 3Com's shares sharply lower!

3Com is among my turnaround bets. I own a small number of shares hoping that a private equity fund will pick them up (at a premium ofcourse), work some magic and take them public again a couple of years later, a la Seagate!

I am giving up on 3Com for now. If it becomes ridiculously cheap, I will be adding more, but I need to see some real explanation for the recent purchase.


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