3Com Shares Edge Lower Amid Release of New Product
By NICK WINGFIELD
THE WALL STREET JOURNAL INTERACTIVE EDITION
SAN FRANCISCO -- Shares of 3Com slipped in trading Monday despite the company's announcement of new technology to speed the flow of data on corporate networks.
Meanwhile, the broader technology sector finished Monday's session lower, as shares of Microsoft slumped. Morgan Stanley's high-tech 35 index fell 10.03 to 502.70 and the technology-heavy Nasdaq Composite Index slid 14.41 to 1634.92.
Stock of the Santa Clara, Calif., maker of networking gear slipped 1 3/16 to 48 15/16 on the Nasdaq Stock Market. 3Com Monday announced a new switch -- a device for directing data traffic on networks -- that enables information to flow four times faster than comparable products from Cisco Systems, the biggest player in the networking market.
Although it may pep up the flow of data, the new switch, known as the CoreBuilder 3500 Layer 3 switch, didn't do much for 3Com's stock. Noell Lindsay, an analyst at Deutsche Morgan Grenfell, said that investors had long known about 3Com's plans to introduce new switching technology, but some people may have expected the products to provide faster performance than the device announced Monday.
"Most of this news has already been reflected in the stock price," Mr. Lindsay said. "What you're seeing this morning is minor tweaking in terms of what people think this is worth. People are getting a better understanding of what's going on."
According to 3Com, the new switch, which will be available in November, transfers data "packets" at a rate of four million per second. Mr. Lindsay said that 3Com executives last quarter suggested to analysts that its switches would ultimately provide faster performance than that, a factor that may have raised some investors' performance expectations too high. On Monday, 3Com said it will "soon" announce the availability of a faster switch, the CoreBuilder 9000, that transfers data at 50 million packets per second, though it did not provide a specific date.
Nevertheless, Mr. Lindsay said he is maintaining a "buy" rating because he believes the 3Com switches are fast enough to give the company a leg up in the high-end networking business, an area in which Cisco dominates.
"I've been telling people that the stock could be viewed as a strategic play," he said.
However, Paul Weinstein, an analyst at PaineWebber, said that news of 3Com's new switch was probably muted by the likelihood that all major networking vendors will announce new products ahead of or during NetWorld Interop, a networking industry trade show taking place in early October.
"Stocks don't move on product announcements anymore," Mr. Weinstein said. Andy Shopick, an analyst with Nutmeg Securities, echoed that statement, saying that the "networking business is a constant game of one-upsmanship" and that its difficult to tell how much impact a product will have until it is actually released into the market.
Another event more likely to influence 3Com's stock is the company's earnings announcement next week. Mr. Shopick is not optimistic that 3Com will meet analysts' expectations for the quarter, due to competitive pressure from vendors such as Cisco. |
