Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Steve Porter who wrote (18204)	6/25/1998 1:37:00 AM
From: Mang Cheng	Read Replies (1) \| Respond to of 45548

"3Com 4Q Sales Rebound; Co Gives Optimistic Outlook" By Mark Boslet (From wsj) PALO ALTO, Calif., (Dow Jones)--3Com Corp. (COMS) said fourth-quarter sales rebounded significantly while inventories remained under control, a sign of improving performance at the networking industry's second-largest equipment maker. In addition, the Santa Clara, Calif., company gave an encouraging outlook toward future business on a conference call with analysts and press. Both the upbeat quarter and better prospects should help calm Wall Street's fears that business would continue to lag or deteriorate. "I think people were bracing for a tough quarter," said NationsBanc Montgomery Securities analyst Alfred V. Tobia. Instead, it was "a very, very solid performance. I think Wall Street will respond favorably tomorrow." 3Com has posted an eratic financial performance since merging about a year ago with modem maker U.S. Robotics Corp. A big part of the trouble has been the clearing of excess inventory from distribution channels, including modems, which depressed growth during the second and third quarters. "You can now assume this operational issue has been nailed," said Chief Executive Eric Benhamou. The company has "clearly turned the corner." This transformation was evident in the company's revenue growth. Fourth-quarter sales of $1.37 billion were essentially flat from a year ago, but up 10% from the depressed levels of the third quarter. Earnings were 17 cents a diluted share, which included several charges and gains, compare with 12 cents a year ago. Without the one-time items, earnings were 18 cents a share, or a penny ahead of Wall Street's expectations. Also for the quarter, the gross margin of 43.5% was up very slightly from the third quarter and expenses were down. Further, internal inventory fell 16% and days sales outstanding, a measure of receivables, fell below 60 for the first time in a year to 56 days. On the revenue front, 3Com reported that sales of systems products - switches, remote-access gear, hubs and routers - were up 22% sequentially, with the growth of its key remote-access equipment "well above" that pace. Analysts and investors had worried that the remote-access products, which 3Com acquired from U.S. Robotics, had been losing ground in the market. Modem sales also were up sequentially, again defying worries of a slowdown. 3Com Chief Financial Officer Christopher B. Paisley cautioned that the first quarter can be seasonally slow. But he said the company's goal is to gain marketshare in fiscal 1999 in product categories such as giagbit and layer 3 switching. 3Com also reaffirmed its long-term financial goal of an operating margin between 16% and 20%. An acceleration in the consumer adoption of fast 56K modems, further, should take place before year end as more Internet service providers put in 56K modem technology, 3com said. The company needs to continue proving the worst is behind it by chalking up further improvements in measures such as inventory turns and days sales outstanding, said Peter Lieu, an analyst at Needham & Co. But investors were quick to rally behind the stock. In the aftermarket, 3Com shares rose 9.7% to 29 3/4. Analysts said the shares could climb into the 30s tomorrow. -By Mark Boslet; 650 496-1366 Mang