3Com squares class actions with $259m
Admits no blame, but..
3Com has settled two class actions lawsuits springing from the 1997 takeover of US Robotics with a whacking great big cash payout of $259 million.
3Com admits no wrongdoing, but it seems an awful lot to shell out just to get some dissident shareholders off its back.
USR deal-related litigation is not over yet for 3Com- the company is fighting a a case which will reach the courts next year.
The settled lawsuits revolve around allegations of securities fraud and insider trading. 3Com saw its stock value double in the two months leading up to the completion of the $7bn takeover of US Robotics in June 1997. During this time, 3Com execs flogged $200 million worth of shares. Only problem was, USR had had a couple of crap months in April and May 1997, wracking up $160 million in losses.
3Com didn't tell the world until Ocotober of that year, to the outrage of many shareholders who bought in April and May. By keeping schtum, 3Com had artificially - and conveniently for its share-offloading execs, inflated the price of its stock, they argued.
Furthermore, 3Com had misrepresented the state of the modem market, they said.
Let's accept, for one moment, the premise of the investors'case. However, they haven't done too badly if they held onto their 3Com stock. Although, US Robotics turned out to be a lot of a dog, the company did own Palm Computing, a business currently worth $26 bilion, and still owned by 3Com. ®