From a newsletter I receive...
"3Com vs. Intel (COMS)
Friday, March 26, 1999
Momentum investor Donald Rowe examines a number of what he
calls "competitive controversies" among high tech leaders
and offers his calls on who has the edge in the battle. In
one of Rowe's contests, he notes that 3Com stock is down 35%
on Wall Street worries that threats from both Intel Corp.
will cause the firm to miss analysts' Q2 1999 earnings
estimates. Intel competes with 3Com on price in the network
adapter card market. But Rowe bets on 3Com as it holds the
lion's share of the market and since Intel's latest
competing card competes on features rather than price.
Rowe sees other reasons to bet on 3Com. For instance, the
firm held its gross margins constant over the past three
years and Dataquest says its Palm Pilot owns 77% of the
hand-held computer market. Rowe also sees software
developers making Palm Pilot programs "at a torrid pace"
(over 2,500 already). In 1998, 3Com sold 1.8 million Palm
Pilot and predicts 2.5 million units shipping in 1999 and 4
million in 2000. Rowe also says 3Com has solved inventory
channel problems that arose when it acquired US Robotics.
More factors in 3Com's favor are plans for seven aggressive
new product introductions over the next year. These include
voice over IP, LAN telephone, storage area networking, cable
modems, wireless and home networking. And Rowe says the
stock is cheap, selling for just 18x FY 2000 estimated
earnings of $1.80.
For more on Donald Rowe's recommendation see "Investment
Opportunity," April 1999, The Wall Street Digest. Donald
Rowe's five-step approach targets stocks and mutual funds
capable of generating 26+% annual returns to quadruple an
investor's wealth by 2004.
investools.com |
