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Technology Stocks : COMS & the Ghost of USRX w/ other STUFF -- Ignore unavailable to you. Want to Upgrade?

To: Scrapps who wrote (9973)	12/3/1997 2:33:00 AM
From: Doug Fowler	Read Replies (4) \| Respond to of 22053

Scrapps: I know you don't want for this to be bad news for 3COM. However, we are talking about a company that is essentially going to report a $500M shortfall in revenue because they now want to manage their inventory better. Why hasn't the company been managing its inventory properly all along? Answer: Because they thought they could "grow" out of it. They now realize that they cannot grow out of it (growth has slowed). They already tried to sweep some of their problems under the carpet in their write-off of the USRX acquisition. I am of the belief that Casey Cowell knew exactly what wall he was running up against when he approached Benhamou about a buyout earlier this year. He knew that USRX was about to get hit very hard with channel inventory build-up, and that the stock would get killed. It is pretty easy to show good, solid growth when all you have to do is stuff the channel for a year or so and then claim a "one-time" write-down of inventory. It goes not only to the issue of growth, but to the issue of trust. I mean, if this company has had this problem for a while, it should have announced this move AT THE BEGINNING of the quarter, instead of waiting until they saw the sales for the quarter were lousy. Instead, investors will never be given a break-down of just went on with the quarter. For example, if the quarter had started with normal inventory and ended with normal inventory, what would sales have been? That is the important piece of data. So, big deal. They unstuff the channel this quarter. Will their sales next quarter be real and sustainable, or will they succumb to the temptation to stuff the channel to deliver the numbers? Will YOU or I know when they report? Likely not. COMS deserves to go down big-time tomorrow because their investors can't rely on either growth or trust from the company. Of course, it is the investors who will pay for their dirty deeds -- the employees and management will probably just get their stock options reset to the new, lower price. I predict 25. Doug