An expensive mistake?

August 21, 2007

images6.jpegBack in December 2004, 3Com (COMS) announced that it was acquiring TippingPoint (old ticker: TPTI) for $430 million, or around $47 a share. The deal, which closed in January 2005, took longer to complete than initially expected, which can often be a reliable sign of potential problems later on. Nearly three years later, it’s pretty clear that my buddy Guru was right: 3Com overpaid.

Fast forward to this summer, when 3Com announced plans to spin off TippingPoint via an IPO, though for some strange reason, it never filed an 8-K announcing its plans, even though it announced its fourth quarter earnings that same day. There’s also been additional talk in some of 3Com’s filings, including in the proxy filed yesterday, which noted that the company is continuing to cover TippingPoint President James Hamilton’s housing, commuting costs and gross up through fiscal 2008 “in light of the need to retain his services while the Company contemplates strategic options for the TippingPoint business unit.”

So far, at least, there hasn’t been an S-1 that’s surfaced. But there has been an interesting trail of comment letters, including this one that was sent on June 1 and which talks about 3Com’s accounting for TippingPoint. The issue appears to have been resolved, judging by a follow-up letter from the SEC on June 19. Still, it was only a week later than 3Com announced its plans to spin-off TippingPoint. Coincidence? Perhaps. Or maybe, it’s just taken that long to admit to an expensive mistake.

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