From WSJ: 3Com Says New Products Are Key To FY99 Growth
By MARK BOSLET
Dow Jones Newswires
PALO ALTO, Calif., -- A new product cycle that 3Com
Corp. (COMS) describes as its largest ever will be the
catalyst for growth in fiscal 1999, company executives said.
As it is, the company said during a meeting with analysts,
products introduced over the prior nine months accounted
for 39% of corporate sales in the fourth quarter of fiscal
1998, which ended in May.
"This illustrates the strength of our new product cycle," said
Ron Sege, senior vice president of enterprise systems.
3Com struggled during fiscal 1998, straining to integrate its
purchase of U.S. Robotics Corp. and to control bloated
inventories in its distribution channel. Fourth-quarter
earnings released last week, however, showed rebounding
sales and moderated inventories, giving Wall Street new
confidence in the company's prospects.
At Tuesday's meeting, 3Com expressed hope that it could
build on that momentum.
The company is "convinced that '99 will be a far more
rewarding year" for employees and investors, Chief
Executive Eric Benhamou said.
During fiscal year 1999, 3Com will work to keep its
inventories under control and to make step-by-step
progress toward raising its gross margin to between 45.5%
and 47.5%, said Chief Financial Officer Chris Paisley. The
fourth-quarter gross margin was 43.5%.
The gross margin should increase relatively quickly, Paisley
said. The company also is focused on continuing to reduce
the amount of inventory it carries in-house, he said.
Meanwhile, 3Com will continue to use selective price cuts to
stimulate modem sales, said Doug Spreng, senior vice
president of client access products.
In June, 3Com cut modem prices in the North American
market by 20%. Spreng indicated the company is now
analyzing the impact of those cuts, abd considering a similar
move in Europe in coming months.
Also in store for fiscal 1999 is the introduction of a new
generation of the Total Control HiPer Access System, the
company's offering for the remote-access market. The
product should come out in the second quarter, said Ross
Manire, senior vice president of carrier systems.
Meanwhile, 3Com is keeping an eye on its competitors: The
moment is right to capitalize on the struggles of such
companies as Bay Networks Inc. (BAY) and Cabletron
Systems Inc. (CS), Sege said.
And, he added, "it is not appropriate to think of Cisco
(Systems Inc. (CSCO)) as this gorilla" that no one comes
close to.
-By Mark Boslet; 650 496-1366 |
