3Com stock fall amid inventory concern, Asia woes
SANTA CLARA, Calif., Nov 12 (Reuters) - 3Com Corp. stock
fell 13 percent Wednesday amid concerns about the networking
equipment maker's rising inventory of unsold modems, slowing
Asian sales and weaker earnings outlook.
At least two Wall Street analysts also slashed their
earnings forecast for 3Com, citing a slower business outlook.
Shares of 3Com, the second-biggest maker of networking
gear, fell $4.25 to $30.875 on Nasdaq trading of 24 million
shares, the most active in U.S. markets. Earlier, the shares
traded as low as $30.66.
3Com specializes in making network adapter cards and modems
for personal computers. The company's inventory of modems may
be 16 to 20 weeks of supply, about twice as high as 3Com's
goal, said George Kelly, analyst at Morgan Stanley Dean Witter.
"It appears the demand for (high-speed) modems has
softened," Kelly said.
Modem makers, including 3Com, have been split about two
competing standards for high-speed modems. The two camps, led
by 3Com and Rockwell International Corp., are selling modems
that do not work with each other.
The industry-wide split is causing consumer confusion and
slowing sales, Kelly said.
Bob Ingols, 3Com spokesman, confirmed that its inventory
levels are higher than normal. "It's a situation that we're
addressing," Ingols said.
3Com also gets about 15 percent of its sales from Southeast
Asian countries, which may be facing a severe recession,
analyst said.
"A reduction of perhaps one-third of previous revenue
levels (from Asia) cannot be ruled out," Kelly said.
Morgan Stanley reduced 3Com's earnings forecast for fiscal
1998 to $2.05 a share from $2.30. It also reduced the revenue
forecast to $6.7 billion from $7.2 billion.
Investment bank Goldman Sachs also reduced 3Com's earnings
estimate for fiscal 1998 to $2.15 a share from $2.30 a share.
3Com's woes also pulled down other networking stocks. Cisco
Systems Inc. , the biggest networking firm, fell $4.125
to $76.50 on Nasdaq. Bay Networks Inc. slid $2.25 to
$27.06 on the New York Stock Exchange.
((--Kourosh Karimkhany in Palo Alto, 650 846 5401)) |
