An article that explain why USRX can't break through, despite all good new regarding X2. It has to drag with it the heavy COMS.
U.S. Robotics Stk Drops Despite Success With Modems >USRX
Dow Jones News Service ~ March 14, 1997 ~ 5:23 pm EST
By Anthony Palazzo
NEW YORK (Dow Jones)--Pity the poor U.S. Robotics Corp. (USRX)
shareholder.
Just when it looks like the company's next-generation modem technology is
going to clean the clock of rivals offering a different standard, U.S. Robotics'
stock price is being dragged down by its planned merger with 3Com Corp.
(COMS).
A string of recent events makes it clear that Robotics is gaining momentum in its
drive to set the standard for modems that can download data at up to 56 kilobits
a second.
Last week, one of the nation's leading PC makers, Packard Bell Electronics Inc.,
said it would ship modems using U.S. Robotics' x2 technology in all Packard Bell
and NEC brand PCs.
Then Thursday, rival modem maker Hayes Microcomputer Corp. confirmed that
despite embracing the competing K56flex technology of Rockwell International
Inc. (ROK) and its allies, Hayes' Practical Peripherals unit will sell some 56k
modems using x2. For good measure, Hayes said it will buy Cardinal
Technologies Inc., another x2 backer.
On Friday, Rockwell said it will delay for another two weeks volume shipments of
the K56flex chip sets it supplies to modem makers. One of Rockwell's
customers, Motorola Inc. (MOT), said it would postpone shipments of its new
modems as a result.
''The reality of U.S. Robotics' momentum in capturing additional market share
through being first to market ... finally seems to be overtaking some of the
rhetoric from its competitors,'' said Steven D. Levy, an analyst at Salomon
Brothers Inc.
U.S. Robotics began shipping its x2 modems on Feb. 24. Despite the market
lead, U.S. Robotics' stock price is languishing, tied through a formula to the
price of its troubled merger partner, 3Com.
The Skokie, Ill., modem maker's stock price actually dropped Friday, when news
of its competitors' problems should have given it a boost.
U.S. Robotics shares fell 1 9/16, or 2.6%, to close at 57 11/16 on Nasdaq, in
tandem with 3Com, whose stock fell 1 1/16, or 3%, to close at 34 5/16.
Under terms of the merger agreement, each U.S. Robotics share will be
exchanged for 1.75 3Com shares.
The price movement ''tells us two things,'' said Jeffery B. Baker, an analyst at
Principal Financial Securities in Dallas. ''One, Wall Street firmly believes the
deal is going to go through, and two, no matter what U.S. Robotics does, its
stock is going to trade in line with 3Com.''
(MORE) DOW JONES NEWS 03-14-97
5:23 PM
U.S. Robotics -2-: Moving Fast To Build 56K Mkt Lead >USRX
Analysts see the recent moves by Packard Bell and Hayes as recognition that
U.S. Robotics is moving fast to build on its marketing and deployment leads.
Because the U.S. Robotics technology is software-based, the upgrade to x2 is
easier than K56flex, which will require new chip sets on both the consumer
modems and the remote access concentrators located on the Internet service
provider's network.
Where modems shipped by U.S. Robotics as far back as August are upgradable
with a simple software add-on, K56flex supporters will have to sell all-new
modems to establish an installed base, said Therese Murphy, an analyst with
Smith Barney Inc.
On the Internet service provider side, the same principle applies, Murphy said.
The x2 upgrade is a software download; K56flex will require stripping out
existing hardware, replacing and testing it.
''They've implemented x2 at America Online in, I think, five cities already,''
Murphy said. ''In the near term, maybe by this weekend, you'll see Compuserve
announcing'' x2 deployments, she said. She doesn't see significant K56flex
access deployments until late summer or early fall.
Shares of Ascend Communications Inc. (ASND), a maker of remote access
devices that will support K56flex, fell Friday on news of the Rockwell delay.
Ascend shares were down 3 1/16, or 5.4%, at 54 1/16.
Murphy notes that Hayes is a bitter enemy of U.S. Robotics, and Packard Bell
was one of the largest OEM customers for Rockwell-based modems.
''Hayes absolutely hated U.S Robotics, in many ways blamed them for their
bankruptcy. For them to go to U.S. Robotics says it all,'' Murphy said.
(END) DOW JONES NEWS 03-14-97 |
