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

To: Glenn D. Rudolph who wrote (13299)	1/15/1998 4:07:00 PM
From: jim bender	Read Replies (1) \| Respond to of 45548

>>>>3Com hosted today (1/14) its annual East Coast analyst meeting in New York. The company gave us an update on its strategy, different business segments and new product rollouts in 1998. The company indicated that its integration of U.S. Robotics has progressed very well and that it sees no risk associated with the acquisition. Business Segment Update: 1) Modems (32% of Revenues.) 3Com reiterated its expectation that the 56 KB modem standard will be adopted by early February. Management also believes that the company will be first-to-market with standard-compliant, fully software upgradable 56KB modems, and plans to ship the product by the end of calendar Q1. We think that such a development would be very positive for the company as modem sales will most likely pick up quickly from the current less-than-expected levels after the standard is determined. Even though the ASP for the standard-based (V.PCM) 56 KB modem are likely to trend lower following product introductions as competition enters the market, we share the company's belief that because of a likely rapid shift toward higher-priced 56KB modems in the overall modem mix, margins should remain quite stable over the next 6-9 months and the overall modem ASP could trend up. 2) Adapter Cards (23% of Revenues.) 3Com's strategy calls for continued product differentiation through software-based, value- added features, a few of which are slated for release in the coming months. The company indicated that it expects to see normal price erosion (15-20%) in adapter cards in 1998 and does not believe Intel will again attempt to shock the market with large pricing action this year (similar to the 40% price cut instituted in February 1997.) We agree since Intel's market position actually deteriorated substantially following the move - Intel lost market share in Fast Ethernet adapter cards by 15 points, rendering the move rather detrimental to its adapter business; and because the transition from Ethernet to Fast Ethernet appears to progress very fast. Consequently, we expect margins to remain stable as the company reduces costs. 3) Carrier Systems - Remote Access Concentration (13% of Revenues.) We believe 3Com has extended its dominance in the remote access concentrator business and has led Ascend by more than 10 points in market share according to most major market research firms. Also, because of the likely success of its new Hiper technology (which enables multiple modem sessions on a single DSP chip and allows for significant per-port cost reductions) , 3Com should maintain margins despite the 30-35% deterioration in per-port pricing we saw in the second half of 1997. We think that the company could actually enjoy higher margins as we expect more benign pricing environment in 1998 as compared to 1997. 4) Enterprise Systems - LAN Systems (32% of Revenues). We believe 3Com has a lot of growth opportunities in its LAN systems business this year with major product rollouts throughout the year. The Corebuilder 3500 Layer 3 switch (began shipping last November) is enjoying good customer acceptance and the company claims that it is winning customers from Cisco's router installed base. The product has recently won the coveted Data Communications Magazine's Product of the Year Award. 3Com will be shipping the high-capacity Corebuilder 9000 in May which could scale multiprotocol routing to 56 million p.p.s. (packet per second). In the workgroup area, the company will be introducing over the next couple of weeks its next -generation 10/100 autosensing switches (at $175 per port) and a 10/100 autosensing hub (at $79 per port), respectively. Through its partnership with Siemens/Newbridge, 3Com, in our view, could benefit from the converging voice/data/video networks. We believe the company will eventually position the Corebuilder 9000 as a PBX replacement, which has the capacity and redundancy to carry the integrated voice and data traffic. Overall, 3Com expects its ASP in the LAN business to be higher in 1998 than in 1997 due to a strong product cycle, and its margins to trend up. While business in Asia continues to be weak, 3Com believes its business there should improve in 2H1998. In addition, the company continues to see strength in Europe and North America and expects the industry to grow at 20%-plus in 1998, versus 15% in 1997.

To: Glenn D. Rudolph who wrote (13299)	1/15/1998 6:43:00 PM
From: craig crawford	Read Replies (3) \| Respond to of 45548

3Com Corp. (COMS) 33 +5/16: Adams Harkness thinks that reduced channel inventory and Asian pressures will severely constrain revenue growth prospects; does not expect return to strong growth scenario well into FY99; says company did not provide new guidance nor discuss Asian issues except in Q&A; feels that Wall Street estimates are still too optimistic and continues to rate the stock "market perform"..... ~~~~~~~~~~~~~~~~~ Hmmm...considering SSB is "pounding the table" on COMS it looks like we have a little divergence of opinion. Perhaps it's time to go back and see who has the best track record for COMS upgrades/downgrades, and settle this once and for all.