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

To: bgg who wrote (27830)	2/8/1999 9:18:00 PM
From: thomas odonoghue	Read Replies (1) \| Respond to of 45548

New to COMS... I loved USRX before COMS bought it. I finally managed to free some cash and bought COMS at what I think is fairly reasonable at these levels. Any speculation on earnings or where COMS may go? I like the long term prospects which is the main reason I bought it, but how about short term 3-6 months?

To: bgg who wrote (27830)	2/9/1999 1:56:00 AM
From: Harold S. Kirby	Read Replies (1) \| Respond to of 45548

bgg: I don't think the thread wants to hear any more "rancor" between you and I.....Please give it a rest! Better yet, make your posts to me in "Private" and open up your page to "Private" responses. This will certainly be welcomed by me, and I think the thread would also agree! Have a good day! Regards, HK

To: bgg who wrote (27830)	2/9/1999 5:04:00 AM
From: Tim McGee	Read Replies (3) \| Respond to of 45548

The Great debate (LONG post): Bgg, Taken together, all of your recent posts here have been fact-based, insightful and thought provoking (not withstanding your penchant for rubbing HK's nose in his many mistakes lately). I, for one, welcome your views on this thread, since it is prone to overly positive and sometimes unchallenged exuberance primarily sourced from company press releases and statements. The detractors on this thread are usually just complaining that we are not experiencing the return of an Internut stock – so its good to have some fact or solid opinion based criticism. I am LT bullish on COM$ as my many posts here can attest even though, from time to time, I have pointed out some of the underlying problems with the company. You have provided good historical insight into some strategic missteps by COM$ management over the long haul. It was potentially a serious mistake to avoid a head on collision in data networking by retreating to the edge. They may have thought they were avoiding a battle when in fact they avoided the war. The cost of this was to forgo any small gains they would have made and cede account control of many large organizations, telcos and ISPs. To date, winning on the edge has provided very little strategic value. Having recognized this over the past few years, COM$ has re-stocked its product portfolio with some promising products to gear up for a penetration into some of the huge markets of the next five years. The jury is still out. Was it better for COM$ to avoid a costly war which it would have likely lost at great, great cost or pursue the path it has taken to get its act together with respect to its edge strategy to begin its penetration to the future core of converged networks? Clearly CSCO has beaten that pants off COM$ in terms of stock performance over most any period. Looking back on it, anyone who chose COM$ over CSCO as an investment to date, has made the wrong choice in terms of investment performance. To argue this point defies logic and sensibility. However, COM$ has a pretty positive life ahead in some big markets… Long term prospects: - VOIP, clearly COM$ will be a player here. In fact, this is one area where COM$ edge strategy has paid off. The edge of the network is not limited to end user access equipment but extends into access control where more intelligence will dominate and penetrate towards the core. This will land COM$ some strategic customer assets. Its strategic partners here can help a great deal towards making this goal. - Convergence, Layer 3 and GB Ethernet: Clearly COM$ will be a player in these areas as they are equally positioned (if not better) than many other players. The CB9K product is coming together as a highly competitive threat and can leverage the success of this product into other wins as well. - Cable, Modems (CPE) and CMTS Head end equipment. Clearly out in front providing total system this should lead to some good quality customers and some big revenue numbers. COM$ also has a set of DSL products that should gain some share by virtue of its modem quality, modem brand and distribution channel (note Dell agreements). - Palm business is a good fast growing business with huge potential for COM$. While not related to its networking strategy, its wireless version may prove successful if the right feature sets and price points are hit. Other Palm products will prove to continue the success here and its partners should help continue to sustain the all-important first in the market success of the platform. - COM$ has identified other areas where they expect to be a player. If successful, these areas will turn a good story into a great story and provide some diversification of business and smoothing of the revenue cycles that hurt COM$ in Q3 and Q1 (which they claim are the worst seasonal quarters). Some areas here include home and storage networking. - Commodity products have benefits and drawbacks. The high percentage of 3Com commodity products justifies lower valuations than 100x of CSCO. However 3Com has proven that it can successfully manage these businesses (after much consternation). The benefits of getting better performance out of low margin businesses will accrue positively to the highly competitive future markets for other 3Com products identified above. CSCO will likely trend the opposite direction with respect to gross margins but their management strength will likely prevent significant damage to their bottom line. Valuations: The great debate of the past 3 years of the stock market has to be the magnitude of the high valuations paid to the clearly dominant companies like CSCO and MSFT. These valuations are sustained by liquidity (or more specifically - liquidity concentration) and lower interest rates. The massive amount of money flowing into the market has resulted in a high level of liquidity but it has been concentrated on a narrow list of equities. This liquidity concentration creates a herd (or lemming) mentality with investment professionals limiting their creativity to search for great values. To my own missed opportunity, I thought this would correct itself last year and positioned my self in more protectively valued issues like COM$ (although I own this stock back 3 years). Obviously the correction that occurred did not do this in any lasting way, however I still remain of the view that it will happen slowly over time. With long term interest rates rising, this will provide more pressure against the extremely high valuations. I admit that I could be wrong and valuation methodologies of market leading companies may have changed forever (given a continued high level of liquidity) but I'd rather be conservative on this issue. I agree with most everything you said about EricB. He is at once a very smart guy responsible for building the number 2 networking player and a completely useless spokesperson for the company. He continually under-whelms when doing public interviews, specifically on CNBC but he is excellent in the detail-oriented conference calls. He clearly has his finger on the pulse of everything happening but does not have the ability to communicate high level visions very well. Other items that are concerning - COM$ complete lack of ability to get attention on some key areas where its strengths will leverage well for future growth. PR skills are very bad specifically at the top of the company. CSCO and others continually trump COM$ even where COM$ has a better story and products. - Account control is limited until the success of key new products. - Alliances are a double edge sword. If alliance partners priorities, incentives and directions change then the Alliance could fold. Happens all the time in the high tech world. MSFT could easily switch horses and go with CSCO even though the two are far too competitive to get along with each other. - Non engagement strategy, this has not provided great results. COM$ must be more aggressive and take on the competition more forcefully. I'd like to see a groundbreaking advance by COM$ that would make it clear they have a leadership role in networking going forward. - Relationship with the Street. This is in jeopardy this quarter. It would be a blow to the great progress of the past year if targets were missed substantially. COM$ has to continue to walk the fine line of meeting expectations, providing timely information, provide positive outlook while not over-promising. Hopefully they can stuff enough into this qtr to hit .36c. - While the current quarter could be slow, it won't cause long-term damage if it is only this qtr affected. Long term damage could come from Loss of major contract (AT&T), Major acquisition of someone like Fore or NN, or major product development delays. I have no information that any of one these are likely but I have no inside information. I remain optimistic about the future of 3Com even given some temporary downturn. I've been in the stock long enough know that it will respond unless there is a major problem of the type I mentioned. I think it will have some qualified success in the future and I look at current prices as another potential buying opportunity (even at these prices it would not average me down). Having said all this, there are still many arguments you make that have caused me to think more critically of my decisions here so I welcome your courteous response to the thread. Tim