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

To: matt fahy who wrote (21994)	9/22/1998 9:35:00 PM
From: Wigglesworth	Read Replies (1) \| Respond to of 45548

3Com Continues Making Progress In 1Q, Is Positive About 2Q By MARK BOSLET Dow Jones Newswires PALO ALTO, Calif., -- 3Com Corp. (COMS) posted solid results for its seasonally tough first quarter and said it was upbeat about prospects for its second quarter. At a time when global economic turmoil has spoiled many companies' performances and summer vacations slow European buying, 3Com topped Wall Street's estimates with earnings of 26 cents a diluted share, compared with a 15-cent loss a year ago. Excluding a gain, earnings in the first quarter were 24 cents, or 4 cents above Wall Street's estimate. On a conference call with analysts and press, Chief Financial Officer Christopher B. Paisley said the company was optimistic looking ahead. "We are quite encouraged by what we see," he said. "We are optimistic about our prospects." For the most part, analysts seemed pleased by the network-equipment company's results, which came on the heels of an improved fourth-quarter, but several troubled periods prior to that. "They made it through...without a hitch" and are now entering the seasonally strong second quarter, said Alfred Tobia, an analyst at NationsBanc Montgomery Securities. "I feel pretty good" about the quarter and the tone on the conference call was "good," said Randall Yuen, a technology analyst at Salomon Brothers Asset Management. Company shares were up in after-hours trading, rising 1 2/8 to 33 5/8. After market close, 3Com reported revenue of $1.4 billion, down from $1.6 billion a year earlier, but up 2% from the fourth quarter. While revenue would have been essentially flat from the fourth quarter without strong sales of the company's Palm Pilot handheld computer, networking equipment for smaller businesses and products for mobile computers experienced strong growth as did the company's power CoreBuilder switches. The price erosion that forced remote-access concentrator prices down about 50% in recent quarters also slowed during the first quarter, a favorable prospect for 3Com's Total Control product family. Industry sources say network operators are presently evaluating remote-access gear - from product vendors including 3Com - for several contracts valued at a total of about $2 billion. In its quarterly report, 3Com said that it reduced in-house inventories by $144 million to $501 million. The company needs the improvement to lift gross margins, Yuen said. But it also saw days sales outstanding, a measure of receivables, climb to 63 days from 56 days in the fourth quarter. In explanation, the company said 49% of product shipments came during the final five weeks of the quarter, which pushed back collections. 3Com Chief Executive Eric Benhamou described future prospects for the company as favorable. The economic woes of places such as Southeast Asia, Japan and Russia contrast with the "robustness" of 3Com's two largest markets, Europe and North America, he said. Benhamou said his outlook for annual growth in the networking industry of a "low-teens" percentage remains unchanged from January. The typically seasonally strong second-quarter sales growth also should enable 3Com to make progress toward its goals of improved margins, Paisley said. Market sources said analysts with earnings estimates at the low end of Wall Street's projections would probably raise their numbers creating a positive environment for the stock on Wednesday. -By Mark Boslet; 650 496-1366 --------------------------------------------------------------------------------

To: matt fahy who wrote (21994)	9/22/1998 11:42:00 PM
From: joe	Respond to of 45548

Mattt, Pretty impressive I think. Here's some of my reasoning. Tell me what you think. >>$1.4 billion sales<< I'm not sure about this, but I think there was sequential growth. Being a tough quarter this is very acceptable. Also, inventory have been lowered considerably. I may be wrong about how accounting works, but if they had decided to manufacture more and keep inventory higher, the sales figure would be higher. >>44.8% gross margin<< I'm not sure this seems right, since last quarter it was around 20% mark. Maybe they're talking about specific product lines. I'll bet you they still mention margin improvement, which is a high priority with analysts. >>8.4% operating margin<< I forget, is this after taxes? I'll have to look it up. >>Inventory down $143M or 22%<< This is great. Now they can beef up big time for Christmas season. Next two quarters will be good. >>A/R up $130M or 15% (quarter backend loaded?)<< Accounts Receivable? I guess this needs comparison with past quarters? "unprecedented market share leadership in Ethernet technologies by becoming the first vendor to attain top positions in all seven categories of Ethernet technology for the LAN workgroup" This part is awesome. They're just beginning their new product transition and dominate this area. This area, IMO, will be a cash cow in 1999. Everybody HAS to have a LAN, and COMS makes it easy to upgrade to higher levels. At some point in 1999, any company without a good high-speed LAN is a company behind the curve in the competition. >>For the historically slowest quarter this report does not appear too bad, definite improvement from prior report which is what was needed to prove they have "turned the corner"<< Yeah, this was the tough quarter, and they show signs of progress. Next two quarters should see a higher sequential increases than this one did. >>No more ghosts to come out of the merger woodwork, hurray, only Palm-sized surprises! :o)<< Did Eric B. really say this? -g- thanks, joe