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: William Wang who wrote (19273)	7/17/1998 12:39:00 AM
From: Mang Cheng	Respond to of 45548

A Lehman brother's report dated July 1, 98 : lehman.com Headline: 3Com Corporation: Positive Tone At Analyst Meeting Author: Tim Luke 1(212)526-4993 Rating: 3 Company: COMS Rank(Old): 3-Neutral Rank(New): 3-Neutral Price : $30 9/16 52wk Range: $60-23 Price Target (Old): $0 Today's Date : 07/01/98 Price Target (New): N/A Fiscal Year : MAY ----------------------------------------------------------------- * Yesterday, 3Com Corp held its usual summer analyst meeting at its headquarters in Santa Clara. While no major new initiatives emerged from presentations following recent 4Q98 results last week investors may be encouraged by more confident tone. * CEO Eric Benhamou acknowledged 3Com's setbacks in FY98 & highlighted progress in managing inventories, more stable pricing outlook, improving demand Europe & new product cycle as factors to underpin a healthier outlook for FY99. * CFO reiterated expectation of steady QoQ improvement in model to longer term target(2 years) of increasing gross margins and operating margins to 45.5- 47.5% & 16-20% from 4Q98 levels of 43.5% & 7% respectively while improving DSOs & inv turns. * 3Com stressing focus on Mid Tier/SME market in Network Systems & voice,data integration for Converged Networks. In Client Access (both modems & adapters) 3Com expanding share while modem pricing may now stabilize given losses at rival Rockwell. * 3Com maintains Microsoft & PC OEM partnerships should support adapter card outlook. Currently maintaining 3-Neutral rating as we look for further evidence of QoQ revenue progression. Expect shares to trade at 18-20x CY99 of $1.60-1.70 or $30-33 range. ------------------------------------------------------------------------------ Stock Opinion/Maintain Neutral Rating But Groundwork Laid For Improved FY99 Following positive meeting in Santa Clara, where managment highlighted the potential for FY99 to represent a turnaround year after setbacks in FY98 we also look for progress in new areas of cable modems and DSL technology. After recent 4Q98 results, we lowered our high end sales and earnings expectations for FY99. For 1Q99, we are now looking for earnings of $0.22 with sales expected to be around $1.401 Billion. We note that 3Com is now entering its seasonably slow 1st quarter and that competition remains fierce in the data networking arena. In FY99, we expect sales to grow to around $6.03 Billion and our high end earnings estimates move from $1.60 to $1.25. At present we are maintaining our 3 neutral rating, since we believe the outlook for revenue growth remains uncertain given ongoing pricing pressure in the lower end of the networking market, as well as in the modem market, and the fierce overall competitive landscape. We recognize, however, that 3Com has made significant progress in reducing its channel inventories and cutting costs. We also recognize 3Coms's expertise across a full portfolio of core networking technologies, its positioning as a large scale low cost producer, and its leadership in channel distribution with truly global reach should position the company as a longer term leader in the networking arena. We look for positive comments from management during the annual analyst meeting scheduled for June 30, 1998. We are currently maintaining our 3 neutral rating as we look for improved visibility on margin improvement and a return to sequential sales growth in the core domestic market. BUSINESS DESCRIPTION: 3Com is a leading vendor of adapters, smart hubs, communications servers, and internetworking devices. Its products address the rapidly growing LAN market and support multivendor enterprise networks. Mang