3Com compared with ugly monkeys, looks lovely!
3Com Seen Beating 2Q Views Of 31c By A Few Pennies
By JOELLE TESSLER
Dow Jones Newswires
NEW YORK -- 3Com Corp. (COMS) should report earnings a penny or two above the consensus estimate of 31 cents a share for its fiscal second quarter ended November, analysts said.
The networking company, which reported a restated 1 cent a share for the year-ago period, is scheduled to announce its results after the market closes Tuesday.
3Com has spent much of the past year coping with bloated inventory levels - particularly in the modem business it acquired with the purchase of U.S. Robotics - but is now on a recovery track, analysts said.
The company should benefit in the second quarter and in the quarters ahead from favorable year-over-year comparisons after 3Com restated its results in March to better reflect poor business conditions from U.S. Robotics.
"People are going to love the comparisons for the next few quarters," said Nutmeg Securities analyst Andy Schopick.
Donaldson Lufkin & Jenrette Securities Corp. analyst Stephen Koffler is estimating 3Com will report about $1.52 billion in revenue, up from $1.4 billion a year earlier.
It is, in fact, not a networking product that is driving much of 3Com's robust growth right now. According to Sanford Bernstein & Co. analyst Paul Sagawa, the Palm Pilot hand-held computing device is experiencing strong sales this Christmas season and accounts for nearly 10% of 3Com's revenue at this point.
A rebound in PC demand also is helping 3Com by driving sales of network access cards and modems.
While modem sales weren't as strong as expected earlier in the year after the adoption of the 56K modem standard in February, Sagawa noted that most modems being sold these days are 56K modems.
3Com also has been benefiting from an improvement in gross margins in recent quarters, analysts said, as the company ramps up its manufacturing operations after slowing production earlier in the year to cut inventory levels.
Sagawa expects gross margins to come in relatively level with last quarter's level of 44.8%.
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