Glenn:
I'm just going with their guidance over the last two earnings reports, until it proves misleading. So far, it's been a shade on the cautious side:
(1) With the Q3 earnings report on 3/20, they projected Q4 revs falling to $675 to $750 million. They came in with $764 million.
(2) With the Q3 earnings report on 3/20, they projected Q1 FY 2001 revenues flat with Q4 at $675 to $750 million. Now their guidance is for modest upside to that number at $775 (+1.4%) to $825 (+8%) million, through revenue decline being less than expected, revenue growth being more than expected, or some combination. If they're still being cautious, I'd expect them to nudge past the $825 million number for Q2.
(3) With the Q3 earnings report on 3/20, they said they expected Q2 revs to increase sequentially over Q1, reaching 15% or so Q/Q by Q4 next year. As noted in (2) above, they're already showing sequential "growth" (or maybe not as big a decline) in revs., so they may well exceed this projected revenue growth by Q4, which would be a major positive. But there's a lot of ground between now and next June.
(4) With the Q3 earnings report on 3/20, they said they'd show a bottom line operating profit in Q3, now it's been pushed back to Q4. I can't give you a better guesstimate than that, just have to watch how they do next Q compared with the guidance. However, this either means they now expect margins to be lower than they previously expected, or that they're plowing more of the operating cash flow into the growth businesses. I'd note that there is tons of competition in the business areas they're focusing on, though from much smaller players than CSCO, who have been largely responsible for 3Coms demise over the past few years.
The market isn't generally good at this "sum of the parts" valuation stuff until it's rammed down their throats through a takeover or spin off. The focus is much more on revenue and earnings growth. And 3Com has burned the analyst community before, so I expect a "wait and see, show us the money" attitude. EB & Co. absolutely have to keep their guidance conservative, so that there are no downside surprises, only upsides.
I agree the stock should have a floor of around book value at $15, and I'd expect the "value" guys to buying at that level, though they'll probably wait and see if the sell off that many seem to expect in COMS actually occurs after 7/27. I'm clearly hoping that it won't drop below about $12, since that's what I paid for my recent COMSV.
All JMO as usual.
David T. |
