Dwight Karlsen writes:
<<To put it simply, I've lost faith in 3Com management.
* How long have you followed 3Com management. The CFO has been there since the company was founded (about '81) and Benhamou has been CEO since about 1990. You've been following those two for how long?
<<There's been all manner of shenanigans going on behind the scenes, such as touting the benefits of the merger, when in fact they knew the channel was stuffed to the hilt, and that the sales accounting of USR didn't jive with how 3Com did it.
*Where's your proof that they knew "the channel was stuffed to the hilt"? During the September conference call, they said they have little visibility of what's in the channel, especially internationally, and that concerns them. Why do you say they knew the channel inventory level? As for sales accounting, they revies it to conform to 3Com's method as of the close of the merger in June.
<<The insiders dumped even as they knew changes were coming which would decimate earnings, yet we never heard a peep about all the problems and the required painful solutions until the insiders had finished dumping.
* Painful solutions? Lowering channel inventories is a good business practice. Why is it so painful? And the company made it widely known that they were trying to lower channel inventories in the quarter, and investor relations let anyone who called know that well over half the business/revenues had to get accomplished in November in order for them to reach consensus estimates. Thus, all the downward revisions in November. They hid nothing.
<<Why were these problems not taken care of in the qtr ending 8-31-97?? At that time we were led to believe that this was it, that the quarter-billion dollar "one time" write-off would take care of everything. That obviously was far from the case.
* As management indicated, they were unaware of the level of channel inventory during the 8-31-97 quarter. The write off was for severed employees, closing of redundant offices and shutting down redundant products, not reducing channel inventories! You are not seriously believing that 3Com could write off 33.6 Kbps and X2 modems in the channel as part of the merger expense? Those modems are selling, just at a slower rate than 3Com would like.
<<The earnings have gone from barely meeting down-revised estimates to totally missing the boat. Is there any reason to believe the situation will change anytime soon?
* Uhmm, earnings are not going to barely meet revised estimates. I believe the revised estimate was $0.44. The company has said that they expect to be slightly profitable, which means about $0.01-$0.04 in the November quarter. The situation will change when the channel inventories are at the desrired level, and sell in = sell out. At that point, 3Com shold be back to earning about $0.50 per quarter, barring other unforseen issues arising.
<<On top of all this, stock is priced right now already for the very rosiest senario for next year, IMO.
* Rosey scenarios like lots of computers requiring 3Com adapters to use networks, lots of people wanting 3Com modems to call their ISP, and lots of companies buying 3Com hubs and switches to upgrade their networks? Why do you doubt this scenario? |
