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Technology Stocks : 3Com Corporation (COMS)

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Jan 23 9:30 AM EST

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To: Shroder Wertheim (Hijacked) who wrote (22670)	10/11/1998 8:15:00 PM
From: Bruce L	Read Replies (2) of 45548

<Hayes bankruptcy and Diamond big loss mean USR modem market shares increase.> I agree. And it's a point that has not been widely noted (as far as I've been able to tell) The perception has been that modems are just a "commodity." But there are major economies of scale in producing 10 million modems a year as opposed to 500,000. COMS can produce them cheaper than Hayes et. al. Further, COMS can spread the R&D necessary to stay ahead of the financially stressed competition over a far larger base production so that the competition never can catch up. COMS may be close to having, in effect, a monopoly. Box makers - and I have Compaq in mind particularly- have been, and will, try to keep COMS honest by placing their orders just to maintain some viable competition but I suspect that they may be near to capitulating. Why pay a premium price for an inferior product and risk losing business because of it?

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