Moody's may up 3Com Corp (NASDAQ:COMS) rating
Reuters, Tuesday, March 04, 1997 at 13:50
(Press release provided by Moody's Investors Service)
NEW YORK, March 4 - Moody's Investors Service placed the
Ba3 rating of 3Com Corporation's $110 million issue of 10.25%
convertible subordinated notes due 2001 under review for
possible upgrade. The review was prompted by the company's
announcement that it would merge with U.S. Robotics Corporation
through the issuance of 188 million new shares of 3Com valued
at approximately $7.3 billion (at time of announcement),
including options.
Moody's will review the financial impact of the
acquisition, potential R&D cost savings, and the degree of
realizable synergies of the combined businesses to determine
whether a rating action is warranted. 3Com has a track record
of successful acquisitions in the intensely competitive and
consolidating networking industry which has allowed it to gain
critical mass and complimentary technologies supported by its
strong brand recognition in Ethernet adapters. Now, with U.S.
Robotics, it will have a leading market position in several new
and old product lines, while obtaining access to U.S. Robotics'
large market of consumers and retailers.
However, the combined entity will also face fierce
competition in network products and consumer modems from
formidable rivals such as Cisco, Intel and Motorola. In
addition, the company will continue to be exposed to the
volatility of the networking industry, and the risk of rapid
product obsolescence.
The transaction will be accounted for as a pooling of
interests, and involve the exchange of 1.75 shares of the new
3Com stock for every share of U.S. Robotics' existing stock.
Additionally, 3Com will take an one-time charge upon the
closing of the transaction which is expected in the fourth
quarter 1997 or early first quarter 1998. The resulting entity
will retain the 3Com name.
U.S. Robotics, with annual sales of approximately $2
billion, is a leading global supplier and manufacturer of
systems products (35% of sales) such as network hubs, remote
access servers, and LAN switching devices, and of personal
computer related products (65% of sales) like high-speed
desktop and PC card modems, hand-held electronic organizers,
and LAN adapter cards.
3Com, a $2.3 billion company headquartered in Santa Clara,
California, is a major supplier of networking products world
wide.
Copyright 1997, Reuters News Service
Companies or Securities discussed in this article:
Symbol
Name
NASDAQ:COMS
3com Corp
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