Xircom slump catches some analysts
off guard
By Ben Sullivan, Daily News Staff Writer
NEWBURY PARK -- Shares in modem maker Xircom Inc. recovered slightly
Friday but hardly enough to cheer up stockholders who have watched the stock
lose nearly half its value over the last month.
On trading of 1.3 million shares, or about 2.5 times its 30-day average volume,
the stock rose 87.5 cents to $20.375, a gain of 4.4 percent.
Xircom shares also rose slightly Thursday, but for most of the last 30 days, the
issue has sunk like a stone, falling from $37.0625 per share March 9 to a low of
$18.8125 on Wednesday. Given the company's recent sales and earnings
performance, the drop has caught some analysts off guard.
"I'm totally surprised," said Michael Whitney at Advest Inc. "I've spent most of
this week looking for a justifiable reason and am finding no problems to speak
of."
Xircom earned $25 million over the last four quarters on sales of $319 million. For
its first quarter ended Dec. 31, sales climbed 82.7 percent to $96 million, while
earnings increased 304 percent to $9.7 million.
Xircom makes modems and other communication equipment for laptop
computers. The company's products -- which generally come in the form of
removable PCMCIA cards -- are considered at the top of their field, and Xircom
has strong backing from industry giant Intel Corp. which owns a minority stake in
the firm.
What appears to have hurt Xircom's shares is a recent earnings warning from
3Com Corp., maker of the popular PalmPilot device and a competitor in the field
of laptop modems.
"3Com's financial performance has not been good, and the most comparable
industry constituent to Xircom is 3Com," said analyst Phil Leigh at investment
bank Raymond James. "The thinking is that whatever 3Com has must be
contagious, but I think that's an invalid assumption."
Compounding this collateral damage to Xircom is that 3Com has called for a
change in industry standards regarding communication devices for portable PCs.
The company wants laptop makers to incorporate modems onto PC cards within
the machines, in a system known as mini-PCI. While happen. The ease with
which consumers can upgrade plug-in PCMCIA modems should maintain their
popularity for some time to come, they believe.
Both analysts said they are bullish on Xircom stock at its current price range,
with Leigh projecting a 12-month price target of $35, and Whitney expecting the
shares to reach between $40 and $50 within the next year.
"I think the investment community will come to recognize the inefficient pricing of
this stock," Leigh said. |
