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

To: Mehrdad Arya who wrote (38478)	1/27/2000 1:59:00 AM
From: mr.mark	Read Replies (1) \| Respond to of 45548

"If he's right, 3Com at 38 times earnings might be the real gem in this deal." wouldn't that be the ultimate irony? what a thought-provoking article, MA. thanks for posting it. :) mark

To: Mehrdad Arya who wrote (38478)	1/27/2000 8:28:00 AM
From: Don	Read Replies (1) \| Respond to of 45548

02/07/2000 Fortune Magazine Time Inc. Page 213+ (Copyright 2000) .... All that is to the good. But investors may not have focused on the downside of Palm's new direction. During the transition from hardware to software company, Palm expects to lose money--remember, it's profitable now--and could shed market share on the hardware side. If you're a momentum trader who has just paid big bucks to make a killing on the IPO, are you going to wait for Palm to find itself? Does anyone think this argument has much merit? I don't think it seems possible (or necessary) for Palm to retain the actual hardware market share that it currently has (even though I believe it is currently growing). This seems obvious with all the partners lining up to license the OS and use it in their devices. I believe this is a very good thing. Handspring, Qualcomm, IBM, Nokia, et al, I suspect that as these partners' markets grow, the revenues from licensing will far outpace what would have come from focusing on the hardware market. Additionally, on the hardware side, Palm has operationalized and outsourced the manufacturing completely I believe. And then there's the matter of competition, which is getting fiercer. First, Palm must fend off the new Handspring--a company run by Palm's founders, Donna Dubinsky and Jeffrey Hawkins--as well as other manufacturers. This is a problem of loss of talent not competition I believe. The uglier battle is with Microsoft, a company that doesn't like to be No. 2. At the moment, the Palm OS has a comfortable lead over Windows CE, an adaptation of Microsoft's desktop system that consumers so far have found awkward and rather short on useful features. That could change. ..... claims his engineers have spent the past 18 months improving Windows CE, making it simpler and adding options such as an MP3 player and an e-book reader ... "It's easy for Palm to sign deals and do press releases," says Weed. "It's another to get in the trenches." Does this sound like typical MS spin? Does Palm have the leadership to take on Gates, Ballmer, and company in trench warfare? If you had asked that question 18 months ago, the answer would have been yes. That's before Dubinsky and Hawkins left to start their own company. Since then, Palm's been a revolving door for talent. This is a point that concerns me. The 3Com CEO, Eric Benhamou, attempted to settle things down in December by hiring Carl Zankowski, former president of Sony Electronics, to run Palm. Zankowski is known for having doubled Sony's consumer electronics business to $10 billion. .... He'll also have to raise morale among engineers and marketers, who are said to be feeling shell-shocked with all the changes. (Maybe it's nothing a few stock options couldn't cure.) I agree that the options strategy should certainly be good. And he'll have to get out from under Benhamou's formidable shadow. ..... In preparing to unload Palm, he has stacked the board and senior management with loyalists. I think a lot of people on this board are concerned about this. So should you buy the stock? Unless you're among the lucky few granted shares at the offering price, Palm is best viewed from the sidelines. Or better yet, buy 3Com . This really makes me wonder if MS isn't behind this article. Why would he suggest buying 3com when he goes on to say that they may not even distribute? Could it be that MS is worried about a post successful IPO Palm with more marketing muscle and partners? Though the distribution ratio has yet to be confirmed, you can count on getting some shares of Palm along with one of the tech industry's rare value plays. Despite doubling since September on IPO euphoria, 3Com has been flat since the U.S. Robotics merger, while Cisco is up 630%. Executives insist letting go of Palm will let them focus on the 90% of 3Com 's business that still comes from networking. The plan is to move into homes and small businesses, where the growth potential is greater and Cisco's presence isn't so suffocating. "I think we have some aces," says 3Com President Bruce Claflin. If he's right, 3Com at 38 times earnings might be the real gem in this deal. I want to agree with this, but I've been surprised by 3Com before and feel a little gun shy. I ended up doing well on my long LEAPS and also on my long position, but I had to hold an extra year because of the last surprise. So I don't know if coms will be good to hold longterm, I'm mostly here for Palm now. Don

To: Mehrdad Arya who wrote (38478)	1/28/2000 3:07:00 AM
From: lkj	Read Replies (2) \| Respond to of 45548

I am posting this message against my own interest, because I hope to buy PALM at as low a price as possible in the IPO. But the article you posted is simply nonsense, and I would like to point it out. And then there's the matter of competition, which is getting fiercer. First, Palm must fend off the new Handspring--a company run by Palm's founders, Donna Dubinsky and Jeffrey Hawkins--as well as other manufacturers. HandSpring is far from competing against Palm. The fact that it can't even set up an online shopping store, you know it lacks people in operations. Nonetheless, the Visor is the type of design that Palm would love to see more. HandSpring is raising the bar in PDA designs, and no doubt, this will lead to great products from the likes of Apple and Sony, which will kill any CE devices out there, including those from Casio. Go HandSpring go, because part of Palm's success is riding on it. The uglier battle is with Microsoft, a company that doesn't like to be No. 2. At the moment, the Palm OS has a comfortable lead over Windows CE, an adaptation of Microsoft's desktop system that consumers so far have found awkward and rather short on useful features. That could change. Rogers Weed, Microsoft's marketing chief for handheld, claims his engineers have spent the past 18 months improving Windows CE, making it simpler and adding options such as an MP3 player and an e-book reader that are as good for entertainment as business. And remember who we're dealing with. MP3 Player and Ebook Reader are applications, not part of an OS. The author of this article is simply clueless. What Palm may have to work on is porting the OS to more powerful processors such as the 32bit MIPS or ARM. Once Palm goes to a more powerful processor, multimedia applications will be there. In reality, we know Palm OS is already running on very powerful processors. Otherwise, why would the "graphics claim of famed" Apple be using Palm, and why did Sony announce to add audio and video applications to Palm OS? Microsoft already owns a lot of desktop investors' eyeballs and has a virtually bottomless marketing war chest to spend luring them to Windows CE-based handhelds. "It's easy for Palm to sign deals and do press releases," says Weed. "It's another to get in the trenches." Hasn't Microsoft been very powerful and rich for the last many years? Palm still kicked its butt. This is not simply signing deals and doing press releases. Look at what the consumers are buying -- Palm, Palm, and more Palm. Palm certainly didn't put out the news releases that CE lost Philips, Compaq, and Everex. MSFT has no leverage from PC to Handheld Computer. This is a new paradigm, just as IBM didn't have much leverage from MainFrame to PC. He'll also have to raise morale among engineers and marketers, who are said to be feeling shell-shocked with all the changes. Palm engineers are some of the most arrogant engineers in the valley. If anything, they should tone down their "I am a bad ass" attitude. They don't need to raise their morale; they need to "lower" them. Khan