To: vinod Khurana who wrote (27521 ) 2/3/1999 7:20:00 PM From: Tom Gebing Read Replies (1) | Respond to
As reported by Breifing.Com.......3COM CORP. (COMS) 39 -5 1/8. So far, February is not turning out to be a very good month for this supplier of local area network and wide area network systems. After enjoying a very nice last two months of 1998 when the stock appreciated by more than 42%, the stock has fallen on tough times during the past couple of sessions, losing 17.5% of its value so far this month. Today alone, the stock is off more than 11.5% after DLJ lowered numbers and made some cautionary remarks. While the Wall Street firm continues to maintain a "buy" rating on the stock, channel price checks are revealing that prices have softened, particularly for 3Com's adapter cards. According to DLJ, adapter cards are fetching 15% less across the board than they did in November. Given that adapter cards generate 20% of 3Com's sales, and 3Com has entered a seasonally slow period for its modems and Palm Pilot products, the drop in price could put a squeeze on margins, and hence, earnings. The tougher pricing environment had not been anticipated and, accordingly, DLJ is lowering earnings estimates for this year and next. DLJ has reduced its Q3 EPS estimate from $0.36 to $0.34, its FY99 EPS estimate from $1.38 to $1.36 and its FY00 EPS forecast from $2.05 to $2.03 a share. The earnings revisions seem to have caught investors flat footed, although current Wall Street estimates are not too different from current market forecasts. According to First Call, 3Com is projected to earn $0.36 in the quarter ending February, $1.39 for fiscal 1999 and $2.01 in fiscal 2000. assumption by others that CSCO's report reflects a loss in market share for 3com. This probably brought out the sellers, shorts and hedge people. Now that the assumptions are done maybe we can get back to rebuilding the stock value with real investors and not momentum players. IMO, we should see backing and filling for a few days , then a resumption back to a realistic level. I would love to see 3com make a comment. But that would be the same as pre-earnings conversation. With the quarter still going and possible backloading going on , I don't see it happening.
