from thestreet.com, in part:
Tech Earnings Problems Continue with Bad News from Motorola and 3Com
By Eric Moskowitz and Kevin Petrie
Staff Reporters
For 3Com, the problems may become more serious than weaker margins. Its
earning problems stemmed from accounting irregularities. 3Com revised its
historical earnings after talking with the Securities and Exchange
Commission about how to account for its pooling merger with U.S. Robotics.
CFO Chris Paisley declined to describe the company's conversations with
federal securities regulators, when analysts prodded him in a conference
call Thursday evening. The SEC, he said, is waiting for 3Com to register
amended documents.
The changes will slash charges to earnings for the combined company in the
first fiscal quarter ended Aug. 31. 3Com will take a restructuring charge
of $270 million, instead of $426 million as previously estimated. Three
factors turned out differently than expected: product swapouts, the
elimination of duplicate facilities, and goodwill write-offs for prior
acquisitions by USRX.
Accordingly, the first-quarter loss shrank to 15 cents per share from 43
cents per share.
However, earnings for fiscal 1997 were trimmed to $500.5 million, or $1.41
per diluted share, from $597.6 million, or $1.69 per diluted share. 3Com
readjusted the timing of both its old fiscal year and USRX's. The new
combined results include the 12 months ended May 1997 for 3Com, the period
July 1996 through May 1997 for USRX, and USRX's March 1997 for a second
time. Wall Street might not appreciate the confusion.
"It's not a reflection of their business going forward," says one analyst
with a buy on the stock who requested anonymity. But such bullishness may
not last. Many Street watchers worry that 3Com has severely harmed its
credibility with the cloudy accounting.
3Com reports earnings for the fiscal quarter ended Feb. 28 later this
month. A First Call survey expects 14 cents per diluted share.
Options players seemed to have been caught a little off-guard by 3Com's
announcement. Trading Thursday was concentrated in the March 35 calls, where
volume reached 3,065 contracts. Volume on the other side of the aisle --
the March 35 puts -- was 1,257, but the price popped 13/16 ($81.25) to 1
1/2 ($150). |
