"3Com CEO: Outlook Hasn't Changed Despite Analyst Pessimism"
Dow Jones Newswires -- February 17, 1999
By Scott Thurm
SANTA CLARA, Calif. (Dow Jones)--3Com Corp. (COMS) 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 positive results for the second fiscal quarter, which ended Nov. 27, and ignored 3Com's warnings about the current 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 recently to 32 1/2 from 47 1/4 on Feb. 1.
Analysts now estimate that 3Com will report earnings of 36 cents a share for the third fiscal quarter and $1.38 for the fiscal year ending May 31, according to First Call. Benhamou wouldn't comment on those estimates.
The company reported earnings of 2 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."
In the interview, 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 |
