this is the severe hit to netwroking I predicted several weeks ago.
I'm already getting eamils and post thanking me for saving people money.
I think it took cpq and dell with it and the cpq fall took cyrix.
News Alert from Reuters via Quote.com
Topic: Intel Corp
Quote.com News Item #2047197
Headline: 3Com plunge on profit outlook, rising competition
======================================================================
(New throughout, adds byline; pvs SANTA CLARA)
By Kourosh Karimkhany
SAN FRANCISCO, Feb 10 (Reuter) - 3Com Corp. (NASDAQ:COMS)
stock plunged by nearly a quarter Monday after the computer
networking equipment maker said its fiscal third-quarter
earnings will be less than Wall Street had expected.
3Com, the nation's second largest networking vendor, also
had to respond to rising competition from PC component
powerhouse Intel Corp.(NASDAQ:INTC) by sharply cutting prices of its
so-called ethernet network products, from which it derives 43
percent of its revenue.
The move fueled even more concern among investors about
3Com's earnings outlook in coming quarters.
Stock in 3Com, based in Santa Clara, Calif., fell $12.25 to
$38.50 in afternoon Nasdaq trading of more than 30 million
shares, making the stock the most active in U.S. markets.
"This goes beyond just the third quarter for 3Com," said
Martin Pyykkonen, an analyst at brokerage Furman Selz.
3Com said for the quarter ending Feb. 28 it will report
earnings per share in a range from the mid-40s to low 50 cents
a share. Wall Street expected 3Com to earn 60 cents per share,
according to a recent survey by First Call, which tracks
analyst estimates. A year earlier, 3Com earned 42 cents a
share, or $74.6 million.
3Com said third-quarter revenues will reach $770 million to
$810 million, missing analyst forecasts by at least $20
million.
3Com makes electronic devices that shuffle information
between PCs operating in a network. The company gets about 43
percent of its revenue from ethernet adapter cards: graham
cracker-sized devices that plug into PCs to link them with
networks.
Last week, Intel, the world's biggest maker of PC
components, cut prices of its line of fast ethernet cards
sharply. The reduction forced 3Com to announce its own sharp
price cuts Monday, fueling concern about the company's revenue
in coming quarters.
"Intel rocked 3Com off its solid foundation," said Carl
Howe, senior analyst at market researcher Forrester Research
Inc. "They hit 3Com's cash cow."
In the next few years, Intel potentially could incorporate
networking functions into its computer chips, eliminating the
need for seperate networking products, analysts said.
Meanwhile, Intel will use its huge manufacturing facilities and
its cost benefit to undercut 3Com in ethernet prices, analysts
said.
Pyykkonen said Intel could elbow aside networking
suppliers, just as it knocked down suppliers of sound and video
components by making multimedia functions a built-in feature of
its microprocessors.
"There's no reason why networking can't go the way of PCs,"
Pyykkonen said.
3Com's shortfall projection prompted several Wall Street
analysts to slash their ratings on 3Com stock to hold or
neutral.
"The tone of 3Com's business remains weak," said William
Rabin, analyst at J.P. Morgan Securities Inc., who cut 3Com to
"market performer" from "buy."
3Com's earnings forecast also raised concerns about the
entire networking industry, whose revenue has been growing
about 35 percent annually. 3Com's woes are a sign that industry
growth is finally slowing.
"Everyone is not only more on edge about 3Com's numbers but
also whether they need to change the revenue picture in the
longer term."
Stock in another major network equipment company, Cisco
Systems Inc. (NASDAQ:CSCO) also fell, dropping $4.625 to $58.50 on
Nasdaq. Ascend Communications Inc. (NASDAQ:ASND), another closely
watched networking stock, fell $4.875 to $62.375, also on
Nasdaq. Bay Networks Inc. (NYSE:BAY) fell 87.5 cents to $18.625
and Cabletron Systems Inc. (NYSE:CS) fell $2.125 to $28.75, both
on the New York Stock Exchange.
Intel also dropped, losing $5 to $151.375 on Nasdaq. |
