<<any more Shorts/Bearish view followers out there or must Craig really confront all Bulls on his own here?>>
Sure, I'll present the Bear story on 3Com
1 - NICs are commodity items subject to increased price pressures: Well, Intel, which does between 1/2 and 1/3 the revenue in NICs that 3Com does, is the only significant competitor to 3Com in this product category. When Intel lowered NIC prices early this year and 3Com matched the cuts, 3Com gained market share on Intel. Is Intel going to cut prices on NICs again? Last time they did, they lost market share and hurt revenues on the whole product segment. You be the judge. If Intel doesn't cut prices, there is no other competitor large enough to affect the market.
2 - Intel will put the NIC function on the motherboard: Intel offers this and the customer has already rejected this as an option for the majority of NICs. 3Com has more "build to order" OEMs for NICs than Intel.
3 - Intel will put the modem function on the motherboard: See #2
4 - Lack of standards for 56 Kbps modems is slowing modem sales: Think about it. If you were buying a computer or modem, would you want one that is 56 Kbps capable today, or 33.6 Kbps capable and upgradeable to 56 Kbps once a standard is set? Again, this is a no brainer, people like to buy the most up to date modern technology (56 Kbps) and companies will buy whatever type of modem corresponds to their remote access server.
5 - Hub/Switch/Router business is getting more competitive: Yeah, that's because Cisco, Bay and 3Com are doing incredibly well and everyone else is losing. 3Com remains #1 in low end, high volume hubs and switches.
6 - Remote access concentrator business is slowing: That means less people are getting connected to the Internet. Who thinks this is the case?
Lets face it, there is little reason for the big drop in 3Com's share price over the past month except for USRobotics channel inventories. As the channel inventory level gets lower, the fundamentals of 3Com's business (low end, high volume networking equipment) are good, and the winner in a low end, high volume product segment are the market share leader (3Com), strong brand name (3Com), strong distribution channels (3Com) well managed company.
In conclusion, the Bear story doesn't hold weight. |
