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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 (10295)	12/7/1997 1:16:00 AM
From: Ian Mahoney	Read Replies (2) \| Respond to of 22053

A real pain in the butt to copy, but here it is...... 3Com says inventory glut, Asian slump depress profits Sales channels overstocked with modems have led many to fear that the networking firm's business would get worse before it got better. It got worse Tuesday when 3Com confirmed rumors that earnings in its second fiscal 1998 quarter, ended on November 30, would stink up the place. The Santa Clara, California, firm warned that sales would be $1.22-$1.24 billion, resulting in only "a slight profit." Complete results for the quarter will be reported December 18. Chief Executive Eric Benhamou blamed the shortfall on flat-to-down sales in troubled Asian economies, and 3Com's decision to shrink inventories of its products in the company's distribution channels. Asian sales had been chipping in a percentage of 3Com sales that the company described as "in the low double digits." Analysts on 3Com's Tuesday conference call took that to mean 10%-15%. For the foreseeable future, Asian sales will likely be flat to negative, warned Benhamou. The new "inventory model" calls for stocking four to six weeks" worth of networking interface cards, six to eight weeks of modems and five to seven weeks of networking systems, such as hubs and switches. Although Benhamou claimed that end-users continued to buy 3Com products at satisfactory levels, he said the company's November-quarter sales would suffer because 3Com restrained shipments to distributors. Sales for the February 1998 quarter also will take a hit, warned the company, because inventories of modems and systems were still not at target levels when November ended. Although distribution channel supplies of network cards finished that month at the equivalent of five weeks" sales, supplies of modems and systems finished at 10 weeks" and nine weeks" sales, respectively. To reach its desired inventory goals, the company indicated that it will need to bleed another $200 million worth of modems and systems from the sales channel in the current quarter, reducing expected sales accordingly. Analyst Al Tobia at NationsBanc Montgomery Securities largely anticipated the bad news on 3Com's channel inventories and had already adjusted his earnings estimates. He's now looking for per-share earnings of $1.20 in 3Com's fiscal year ending May 1998, and $2.20 in fiscal "99. Many other analysts cut their estimates after Tuesday's warning, and First Call now shows the average forecast to be $1.08 for 1998 and $1.99 for '99. Benhamou acknowledged that he was disappointed in demand for his company's US Robotics brand modems. He blamed the weakness on unsettled industry standards for the 56-kilobitper-second transfer speed. Once those standards are set, he asserted, 3Com's modem revenues would bounce back. Regardless of whether sales of 56K modems ultimately live up to Benhamou's expectations, investors seemed cheered on Friday when 3Com and its modem rivals at Lucent Technologies and Rockwell Semiconductor said they had agreed on a 56K standard that they hope will be adopted at a February 1998 industry meeting. Shares of 3Com jumped about $3 on that news, ending the week at the same level they'd ended the previous onearound $36.