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Technology Stocks : 3Com Corporation (COMS) -- Ignore unavailable to you. Want to Upgrade?

To: KyrosL who wrote (34412)	9/22/1999 3:51:00 AM
From: mr.mark	Respond to of 45548

September 22, 1999 Profit at 3Com Tops Forecasts Thanks to Efforts to Cut Costs By SCOTT THURM Staff Reporter of THE WALL STREET JOURNAL Earnings at 3Com Corp. sailed past analysts' expectations for its fiscal first quarter, providing some much-needed stability as the maker of computer-networking equipment prepares to spin off its Palm Computing division. The Santa Clara, Calif., company posted net income of $137.5 million, or 38 cents a diluted share, for the three months ended Aug. 27, up 47% from $93.7 million, or 26 cents a share, a year earlier. Excluding one-time gains, 3Com said it would have earned $119.3 million, or 33 cents a share, up 38% from earnings excluding one-time items of $86.7 million, or 24 cents a share, a year ago. The First Call/Thomson Financial consensus estimate was for earnings excluding one-time gains of 24 cents a share. The company posted earnings after the market closed. 3Com shares rose to $29.75, their highest level in three months, in after-hours trading, according to Instinet. Earlier in the day on the Nasdaq Stock Market, 3Com fell 43.75 cents to $27.3125, amid a broad sell-off in technology shares. The report likely will prompt analysts to increase their estimates of 3Com's earnings for the remainder of its fiscal year by 10% or more, according to several analysts. "Overall, it was very good news," said Al Tobia, of Banc of America Securities. Revenue slipped 1% to $1.39 billion from $1.41 billion a year ago. Sales of modems and network-adapter cards, 3Com's traditional bread and butter, dropped 19% amid sharp price declines, suggesting the company still faces a difficult transition. 3Com is trying to reorient its business around access to the Internet through high-speed-telephone, cable-television and wireless connections. The company also wants to bolster its products for connecting computers inside businesses, where it has fallen far behind Cisco Systems Inc. Sales of those products increased 9%, and profits leaped more than threefold. Still, it won't be easy. Adapter-card sales are declining, but they are still 3Com's most profitable business. And the Palm handheld computing unit, which 3Com plans to spin off next year, is the fastest-growing division. In reporting Palm sales separately for the first time, 3Com said Palm revenue grew 50% to $174 million. Without Palm, 3Com's revenue would have declined 6%. In a call with Wall Street analysts, 3Com Chairman and Chief Executive Eric Benhamou attributed the sluggish sales to seasonal issues. Chief Financial Officer Chris Paisley said revenue likely would decline in the current quarter, ending in November. 3Com was able to report stronger earnings because of aggressive cost controls. Gross margins improved to 46.7%, compared with 42.9% a year ago, while inventories declined 30%. "We are pleased that our emphasis on operational improvements is having a substantial positive impact on our profitability," Mr. Benhamou said.

To: KyrosL who wrote (34412)	9/22/1999 9:29:00 AM
From: KyrosL	Read Replies (1) \| Respond to of 45548

3Com plans to up buyback by 10 mln shares; Q2 costs seen rising on marketing [Some comments on this: Last quarter 3Com spent $392 million repurchasing shares at an average of around $25 per share. In spite of this, cash actually increased to $1.7+ billion from previous quarter. This quarter more millions of shares are going to be repurchased (see below). This is a wonderful non-taxable dividend for stockholders that, I think, is not getting enough attention here or anywhere else. If 3Com price remains in the thirties, in a few years there will be no 3Com shares left at this rate of repurchase -- of course, 3Com shares will go considerably higher than the thirties. The comments of Paisley regarding increased cost in Q2 are so that the analysts keep their estimates conservative and the company again beats them handily. This will set the stage for a nice rally going into the IPO in early 2000. Kyros] SANTA CLARA, CA, AFX via NewsEdge Corporation : 3Com Corp executives said they plan to ask the company's board of directors to increase its share buyback plan by up to 10 mln shares, and an aggressive TV marketing campaign that could increase costs. 3Com reported first quarter to August earnings per share of 38 cents, compared with 26 cents in the year earlier period, and analysts' expectations of 24 cents. The company said first quarter pro forma earnings per share were 33 cents excluding a 23.6 mln usd gain from the sales of investments and a net pre-tax credit of 2.1 mln usd related to the merger with U.S. Robotics Inc last year. Chief financial officer Chris Paisley said in a conference call with analysts following the results, the company plans to ask its board of directors to increase the number of shares in its share buyback program by 10 mln to 14.8 mln. Also, Paisley said while second quarter costs are expected to rise from first quarter levels of 494.8 mln usd in part because of an aggressive marketing campaign that will include TV advertising and after strict cost controls in the first quarter, and faster than expected attrition in its workforce. Despite a 2.1 percentage point jump in gross margins to 46.7 pct in the first quarter from the fourth quarter, 3Com still expects gross margins between 46.5 and 48 pct in the year to June 200, Paisley said. Executives noted that revenues from its Palm Computing Inc rose to 13 pct of overall revenues from around 10 pct in the fourth quarter. They added that costs will probably increase from the spin-off of the PalmPilot maker, as "we have to fill two infrastructures instead of one," Paisley said, but did not comment further on the planned spin-off. 3Com's second quarter to November is traditionally its seasonally strongest, and Paisley said the company "expects that to be the case" for this quarter. He added if the company will experience any impact from a Year 2000 bug related slowdown, it will take place in the next two quarters. Paisley reiterated his earlier guidance that second quarter revenues will be lower than the year earlier period as a result of the company's strategy to move away from slow growth areas like modems and network interface cards and third and fourth quarter revenues will grow. Chairman and chief executive officer Eric Benahamou said revenues from wireless access and broadband products should start contributing to its second quarter revenues, both at its personal connectivity and network systems divisions. Benhamou said its will start shipping its first wireless access product, the AirConnect, to corporate customers in this quarter, and will announce a broadband DSL deal with two large regional Bell operating companies (RBOCs). Paisley said the U.S accounted for 55 pct of sales at 764 mln usd, a decline of 5 pct from a year ago, while sales outside of the U.S. rose 4 pct to 622 mln usd in part because of seasonally slow sales in Europe.