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

To: Jurgen who wrote (14837)	3/24/1998 10:02:00 PM
From: Mang Cheng	Respond to of 45548

From Fool.com : "3Com Reports" Tuesday, March 24, 1998 by Jeff Fischer (JeffF@fool.com) ALEXANDRIA, VA (March 24, 1998) -- The Fool topped the strong market, rising 1.4% as the S&P gained 0.9% and the Nasdaq jumped over 1% -- despite another decline in Intel (Nasdaq: INTC). Tomorrow Intel's brother of sorts might be 3Com. 3Com (Nasdaq: COMS) announced third quarter results after the market closed, with the stock halted at $37 1/4. The number-two networking giant reported earnings of four cents per share, well below estimates of fourteen cents. The earnings were actually two cents per share after accounting for a merger credit. This column will present about two cents worth of thought on the news. (By the way, that's a link to the company's press release for your Foolish perusal.) 3Com's revenue rose 4% from the previous quarter to $1.25 billion, but gross margins declined to 43% from the 50% perch achieved last year. Declining prices in the low-end networking market forces 3Com to cut prices, too, in order to maintain market share -- which the company leads by a long shot. But it's not entirely great to be a market share leader without having pricing power, too. Sales of high-end products, like switches and hubs and platforms, declined from $621 million to $549 million in the last quarter, adding to lower margins. Sales of network interface cards and modems jumped, rising from $598 million to $700 million -- but margins on these products aren't nearly as high. 3Com claims that its inventory issues have been resolved and now the plan going forward is to, again, focus primarily on marketing. The company offers promising new products after working to increase its product depth, and is thought to be entering a new product cycle. So as dismal as the current fiscal year has been for 3Com, next year at least has the potential to improve substantially. Let's hope. This stock hasn't gone anywhere at all -- it's flat -- since early 1995. Ouch! That especially hurts having happened during a record strong stock market and during the initial growth years of the Internet. What are our thoughts now about holding 3Com? We're always looking for new investments that we believe offer more potential than our current holdings, but we're also, as David reiterated yesterday, long-term investors who rarely trade. If a sell is merited it will be made when we believe that we've found something better in which to invest the money. That said, right now we have no plans for selling 3Com. The quarterly report and the conference call need to be looked over and discussed with a long-term frame of mind before anything else. If anything, though, I personally would like to consider selling it and replacing it with Cisco Systems (Nasdaq: CSCO), the industry leader, if we want to remain in one networking stock for the next five years or longer, as I think that we do. Paul Motter (TMF DotCom) will write this column on Friday. Paul hosts the Fool's networking industry message board and he'll share his thoughts on 3Com here, so let's not beat this horse too much right now. It's not moving anywhere. The playback number for 3Com's conference call is (303) 642-1751. It's available untilabout 7:00 pm tomorrow, Wednesday. fool.com Mang