<<Coms has never really competed on a major level in the router market.......Why don't we ask ourselves what % of 3Com's revenues are generated from ROUTERS>>
MA - you're wrong, sorry. COMS had at one time the best routing code, after buying Bridge - they didn't exploit this, EB has admitted this. Second, COMS' enterprise group fiercely competes for router deals, and they do have some large prestigious accounts, but the product pipeline has pretty much dried up.
The lack of router share is an achilles heel - routers are extremely high margin, and more importantly this one product in particular pulls along most other pieces of the enterprise and carrier (to a lesser extent) purchases. This explains why CSCO is growing at 30%+ yoy - they own the most complex piece of the puzzle (routers) and that has allowed them to become #1 in other areas - switches, remote access, etc.
The challenge that COMS has is to develop and keep lead in their emerging markets - VOIP, LAN telephony, wireless, but my assessment is that they will not be able to keep pace with CSCO in the VOIP and LAN telephony areas but they may in wireless and the broadband CPE side. However, wireless and broadband are less than 10% of total revenues, and broadband CPE will be viewed as a commodity.
So, COMS after Palm, will have to probably acquire some high growth businesses or be acquired - otherwise the current company w/o Palm will be growing at single digit or low double digit rates as a whole for the next 4-6 quarters.
Long COMS, but believe the price run up to come will be due to Palm spinning off and improved cash flow from operations. |
