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

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Nov 7 11:47 AM EST

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To: Dwight E. Karlsen who wrote (10290)	12/7/1997 5:39:00 AM
From: Elroy	Read Replies (2) of 22053

Oops. Pressed the submit button a tad too early. Here's Dwight's excerpt from a post by a guy named Craig: "They chose to mention in a footnote that USRX had only $15.2 million in sales for 2 months and then hid some of the cancelled sales in the charge (of course they didn't specify how much). They elected to take a hit to retained earnings to reconcile the balance sheet. Obviously COMS monkeyed with the books to come out with 48 cents a share. It is no coincidence that they pegged the number right on. They took as big as a charge as they could while still "matching" estimates. They stated in their 10Q "Revenues for the two-month period were below historical revenue trends due primarily to the desire to reduce levels of channel inventory and conform sales return and allowance reserve philosiphies with that of the heritage of the 3Com organization." It is obvious that COMS used part of the hefty charge they took to reduce channel inventories last Q. THAT STILL WASN'T ENOUGH. They had to warn about a "minimal profit" this Q to reduce the channel some more! To make matters worse they said they are going to need another couple hundred million next quarter to do it again!" --------- end excerpt from Craig's post ------------ *Yeah, so it seems that USRobotics keeps larger channel inventories than 3Com would like. So? No one is going to argue with that issue. The key issues are that 3Com has about 35% share in the remote access market via the Total Control Hub, has #1 position in desktop and workgroup Ethernet switching, holds about 40-50% of U.S. modem market share and is the market share leader in adapters. 3Com will release more new systems (hubs/switches/routers) products in their fiscal 1998 year than in any previous year. 3Com has always (check out their history, Dwight) executed well when releasing new products into their large base of channel partners. Given all these things and realizing that 3Com inherited a stuffed channel, why would the stock decline from its current level??? The channel problems are well known, and the very positive outlook for 1998 is also well known. As the number 2 player in networking, who would want to sell/short this stock??? Do you really believe the stock is more likely to end 1998 at 20 something or 60 something?

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