Here's something you won't see very often:
3Com CEO Maintains Outlook Despite Recent Downturn In Stock
By Scott Thurm, Staff Reporter
SANTA CLARA, Calif. -(Dow Jones)- 3Com Corp. Chief Executive Eric
Benhamou said the outlook for the computer-networking company hasn't
changed despite a wave of analyst pessimism that has driven 3Com's
shares down more than 30% this month.
Benhamou told Dow Jones that analysts had reacted too optimistically
to 3Com's (COMS) positive results for the second fiscal quarter, which
ended Nov. 27, and ignored 3Com's warnings about the third quarter,
ending Feb. 26.
"For some reason, the investment community" forgot about the
cautions, Benhamou said. Then, in early February, he said, analysts
seemed to have a joint "wake-up call."
Eight of the 27 analysts who follow the company have lowered earnings
estimates for 3Com's current fiscal year since Feb. 3, according to
First Call Corp. The lowered estimates have helped drive 3Com's stock to
a $32.188 closing price on Wednesday from $47.25 on Feb. 1.
The mean estimate of analysts surveyed by First Call is for earnings
of 36 cents a share for the third fiscal quarter and $1.38 for the
fiscal year ending May 31.
The company reported earnings of two cents a share in the year-ago
third quarter and of 67 cents in fiscal 1998.
But Benhamou said he wouldn't describe 3Com's outlook any differently
today than he and other officials did in a Dec. 22 conference call.
Then, Chief Financial Officer Chris Paisley warned that the third fiscal
quarter is traditionally 3Com's toughest, and raised the prospect that
3Com's revenues wouldn't grow from the $1.54 billion reported in the
second quarter. Paisley noted at the time that 3Com's results have
become more seasonal with the growth of its consumer businesses, such as
the Palm Pilot personal organizer. The winter is typically the slowest
season for consumer-oriented businesses.
Some analysts attributed their reduced estimates to earnings
shortfalls reported by 3Com's two largest distributors, Ingram Micro
Inc. (IM) and Tech Data Corp. (TECD). But Benhamou downplayed these
concerns. He said the distributors are suffering from problems in the
personal-computer business and that their sales of networking gear "are
stronger than ever."
Benhamou repeated his and Paisley's earlier statements that 3Com's
results would likely rebound strongly in the fourth fiscal quarter.
- Scott Thurm; 201-938-5099
Copyright (c) 1999 Dow Jones & Company, Inc.
All Rights Reserved.
|
