Yesterday's news: 3Com Falls on Concern About Lost NIC Market Share
Bloomberg - November 3, 1998 20:13 EST
Santa Clara, California, Nov. 3 (Bloomberg) -- 3Com Corp. shares fell
6.2 percent amid concern that the No. 2 computer- networking company
is losing some of its leading share of the market for computer-connector
cards to Intel Corp.
Its shares fell 2 1/4 to 34 in trading of 17 million shares, making it
the fifth-most active stock in U.S. markets.
3Com is the top maker of low-cost networking gear, including the so-called
network-interface cards, or NICs, that link PCs to corporate networks.
Yet the company faces increased competition from Intel, the No. 1
computer-chipmaker, which cut NIC prices earlier this year. Analysts
believe Intel may have taken market share from 3Com during the third
quarter.
Market share figures to be released in the next few weeks are ''likely
to show large market share gains for Intel during the third quarter of
1998, while 3Com is likely to show some decline from strong first-half
1998 results,'' according to a report by Paul Weinstein, a CS First
Boston analyst who rates 3Com ''strong buy.''
Weinstein estimates 3Com's share of the market for the most common type
of NIC was ''in the mid-40 percent range'' and Intel's ''in the mid-30
percent range'' for the third quarter.
Still, the market share shift is likely to be short-lived and ''does not
signal a material change in 3Com's outlook,'' Weinstein wrote.
CIBC Oppenheimer analyst Martin Pyykkonen agreed. ''It would have to be
a sustained shift to be meaningful,'' said Pyykkonen, who rates 3Com
''hold.''
NIC sales contribute between 25 percent to 30 percent of 3Com's total
revenue, he estimated.
Revenue for 3Com's first quarter ended Aug. 28 fell 12 percent to $1.41
billion from $1.60 billion in the year-earlier period.
3Com spokesman Brian Johnson said the Santa Clara, California-based
company has yet to see any market share numbers for the third calendar
quarter and also hasn't seen any evidence of a slowdown in NIC sales.
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