COMS & the Ghost of USRX w/ other STUFF Message Board

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Technology Stocks : COMS & the Ghost of USRX w/ other STUFF

COMS 0.00130

-18.8%

Nov 7 11:47 AM EST

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To: Crotty who wrote (9190)	11/14/1997 4:14:00 AM
From: Dwight E. Karlsen	Read Replies (2) of 22053

Re: Big inventories of modems at retail. My analysis. Eric Benhamou has recently explained to analysts that U.S. Robotics kept stores in stock with higher than optimal inventories of modems. I was wondering if anyone else is wondering why this wasn't addressed sooner by 3Com. 3Com has been in charge of the USR acquisition for five months, if I remember right. He also announced that 3Com didn't like the way USR counted modem sales. Guess I must have missed that item in the Merger Proposal. Austerity measures announced to improve the inventory situation are: a) Withholding shipments of modems to vendors until vendors ask for more. This will position 3Com better regards to pricing. b) Apparently USR used to count modems in the channel as a sale. 3Com would like to switch to the system where sales are counted when in end user's hands (at least in the U.S.). Obviously the above items are going to cause not a small hiccup in sales. Which means missing earnings estimates. I hate to say it, but the guy who suggested this about a week ago was dead on right. It occurred to me that Eric Benhamou maybe has known of this inventory situation for quite some time, but he has waited to announce the reforms. It's possible IMO, that he would want to wait and make sure all the 3Com kids had sold all the lemonade they wanted to. He knew what reforms would do to the share price, so he simply waited until his people wouldn't be damaged. I'm not expecting any heroic efforts anytime soon by Eric & Co. in support of the share price. The analyst road show will have to wait until a bunch of insiders need to exercise some more options. Next time I see a bunch of insider sales, I hope we aren't all so gullible in thinking it doesn't have anything to do with an impending decline in the share price. I'm slow, but I'm starting to figure these guys out. DK

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