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

To: Glenn D. Rudolph who wrote (12439)	12/18/1997 7:54:00 PM
From: James A. Shankland	Respond to of 45548

Ok..where are the people that live [in Asia] that would really know?? You don't need to live in a country to know that when the value of its currency drops by 50%, and the value of its stock market by 30%, there's a problem.

To: Glenn D. Rudolph who wrote (12439)	12/18/1997 7:54:00 PM
From: craig crawford	Read Replies (2) \| Respond to of 45548

I know a person living in S. Korea. Trust me they tell me it looks pretty bleak. I also know people from China that visit regulary. (FWIW)

To: Glenn D. Rudolph who wrote (12439)	12/18/1997 8:04:00 PM
From: Mang Cheng	Read Replies (1) \| Respond to of 45548

Motley Fool report : 3Com 2Q Earnings December 18, 1997 by Randy Befumo (TMFTemplr) ALEXANDRIA, VA (December 18, 1997) -- In a quarter that just served to prove the company is having the worst fiscal year of its existence, Santa Clara, California-based 3Com (Nasdaq: COMS) reported that it only earned four cents per share. 3Com hit the low end of the $1.22 to $1.24 billion revenue range revealed in its December 2nd press release and delivered on the "slight" profit that it had promised. 3Com Chief Executive Eric Benhamou continued to express concern over Asian sales, pointing out that 25% of all personal computers are sold in Asia. As network interchange cards (NICs) and modems are very dependent on overall PC sales, this creates uncertainty about demand for two of 3Com's main product lines which account for about 49% of total sales. Enterprise products like switches, routers and remote access devices accounted for 51% of 3Com sales in the second quarter. Revenue from enterprise products relative to client access products (NICs and modems) flip-flopped from the first to second quarter. In the first quarter, 55% of revenues came from client access devices, or $886.8 million This quarter only $598.8 million came from client access devices, a 32.5% sequential decline. Higher-margin enterprise products delivered $621.5 million in revenues compared to $714 million last quarter. This was a 13% sequential decline but was not off all that much from year ago levels, indicating that this business was quite a bit stronger for 3Com than its much-maligned client-access business. Compared to what some of the large networking systems vendors are seeing, a 13% sequential decline is a lot less serious than many expected. Asia overall accounted for 9% of sales in the second fiscal quarter, down from 10% in the prior quarter. One percent of overall sales is a pretty substantial figure, but the real problem 3Com faced this quarter was the fact that they did not make a sale in key products lines from two to ten weeks in order to clear out an inventory build-up that had been going on for months. The East Asian economic turmoil is very real, but 3Com's current turmoil quite obviously goes well beyond this region of the world if only 10% of its business is occurring there. Clearly the sales channel in the U.S. for modems and possibly NICs was over-stuffed, confirming months of short-selling trash talk that U.S. Robotics had too much product in the channel. Ultimately, these results simply confirm that it is difficult to draw any conclusions about what is occuring in the networking industry. Some believe that the damage seen at Cabletron (reporting its second quarterly disappointment in the last two quarters), Bay Networks (with conflicting reports about modem demand) and Cisco Systems (Nasdaq: CSCO) (with increased levels of finished goods in its inventory) is all the result of a general slowdown in the industry, stating that there has been no failure on the part of any of these management teams to execute. Certainly the problems seem to have far-reaching implications, but many of these problems -- including the inventory build-up at 3Com -- should be laid squarely at the feet of management, not a blip in Asian demand that began mid-way through a lousy quarter. While 3Com has clearly done the right thing by cleaning out the inventory channel and taking on a lot of short-term pain to make for solid sales comparisons going forward, investors should remain cautious about any potential earnings or sales growth they see from any company in the networking universe until the company begins to prove it on the bottom line. By tactically investing these companies when market share is high and valuations are low, you can minimize the downside while still finding a way to participate in a fast-growing industry. fool.com