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Technology Stocks : 3Com Corporation (COMS)

COMS 0.00150

-28.6%

Dec 11 9:30 AM EST

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To: BobInBush who wrote (28865)	3/9/1999 1:57:00 PM
From: Doughboy	Read Replies (2) of 45548

Palm Computing does not make very much profit. I don't know how you could possibly know that, Bob. Palm Computing makes about 10% of 3Com's revenues; or about $100-150 mm last quarter (wild guess: 600 mm in fy99 ending in May). Near as we can tell (3Com does not break out those revenues), Palm is growing revenues at 50-75% YOY. Palm comes from the business segment in 3Com that has the highest growth, and I would assume that Palm contributes most of the growth, since analog modem sales certainly aren't growing. I would conservatively guess that 3Com has a gross margin of 45% and net margin of 15% on Palm sales (in line with its other lines of business). If it reaches an annual run rate of $1 billion in FY00, then it's making 150 mm a year net or about .40/share. As a standalone business, IMO, Palm Computing should get at least 50x earnings--or around $20 per share based on FY00 earnings. Now, I'll admit that this entirely a back of the envelope estimate since we really don't know how the numbers are but my basic assumptions are supported by 3Com statements and analysts' estimates. Doughboy.

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