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

To: Doug Fowler who wrote (9975)	12/3/1997 3:18:00 AM
From: Scrapps	Read Replies (1) \| Respond to of 22053

>>>Scrapps: I know you don't want for this to be bad news for 3COM.<<< Well Doug I know I run the risk of being seen as a cheerleader for USR/COMS, however, that is not my goal at all! If COMS is a turkey...so be it! I for one have never ever bought any 3Com stock...got here via the merger. Nearly sold all my shares on Oct. 15, but decided to hold. >>>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.<<< I'm going WAY out on a limb now...but the WSJ has an article quoting some analysts as saying this is a good move 3Com has taken. I happen to agree. Why hasn't the company been managing its inventory properly all along? Well let's first try to understand how large the company is now...and how different things look going forward from where we are now...looking backward. I for one felt a temporary ITU 56K standard would have been in place by now...thus increasing demand for higher speed modems. If it had occurred that way, bringing down inventory levels would have been simpler and much more profitable. Answer: Because they thought they could "grow" out of it. They now realize that they cannot grow out of it (growth has slowed). You are mostly correct, HOWEVER, growth hasn't slowed, BUT, competition has increased. They already tried to sweep some of their problems under the carpet in their write-off of the USRX acquisition. I don't buy that at all, to child like, these folks have more smarts then that, and I will wait for the CC for more inf. on it. 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. Cowell as he has said before knew competition was increasing and USR would be got by someone if not COMS. Had he wanted to reduce inventory he could have done so before the merger (which was being set up in January of 97), and paid the 5 mil to get out of the deal. You are right he knows what he's doing...he is the largest share holder of 3Com stock. So if he screws us, or screwed us, he did it to himself also. 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 tell us what normal inventory is for this recently merged company. If you can't...then tell us what it would have been for each company had they not merged. I just asked that to illustrate how hard it really is to know (looking forward). You should go back and check what was said last earnings report. 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. They said today the next quarter will be effected because they couldn't reduce the inventory to their goals this qtr. 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. Temper temper. <G> Good Luck to you, Scrapps

To: Doug Fowler who wrote (9975)	12/3/1997 5:26:00 AM
From: Dwight E. Karlsen	Read Replies (2) \| Respond to of 22053

Doug, I agree with all you say, except I predict 24 or lower. These endless "one time" charges just hide what's really going on. Maybe after a couple of profitable quarters investors will have a better idea of 3Com fundamentals. Meanwhile, I'm not going to be holding the stock. An analyst in the WSJ said "These channel inventory problems tend to be sticky, and sometimes it takes longer than you think to iron them out". (or words very close to that). The networking field is simply too crowded. Reminds me of the DD industry. DK

To: Doug Fowler who wrote (9975)	12/3/1997 11:39:00 AM
From: gfr fan	Read Replies (1) \| Respond to of 22053

<<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.>> Doug - agree this is an important piece of info. Direct Sales plus the sales through the channel (or known as sales out) is the key criteria right now to see if COMS is growing. I think the answer to that question is yes, their is q/q growth based on sales out and direct sales.