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

To: Mr.Fun who wrote (29291)	3/26/1999 9:03:00 PM
From: hitesh puri	Read Replies (4) \| Respond to of 45548

3Com pieces summed up individually are more valuable than the whole. I am surprised at WS valuation of 3Com. If you calculate its market cap by weighing each divisions revenue stream along with an appropriate multiple (say they were to get sold or acquired) you get something like this : Systems Division - 700 M per Q x 4 = 2800 M / Year A company solely providing LAN/WAN Core/Access systems even in the doldrums like FORE and NN gets a market cap averaging 3.5 times annual sales. So Market cap for Systems Division = 2800 x 3.5 = 9800 M Client Access Division - 600 M per Q x 4 = 2400 M / Year A mature and slowing growth division like this should only get a multiple of 0.5 So market cap for the Client Access Division = 2400 x 0.5 = 1200 M Handheld Division - 100 M per Q x 4 = 400 m / Year Fastest growing and most exciting prospect product division can definitely get a multiple of 5 Hence market cap for Handheld division = 400 x 5 = 2000 M Cash and Equivalents (conservatively less than actual) = 1000 M Finally adding the value of each individual part of 3Com evaluated separately within their own merits yields a market cap of 14000 M. Number of outstanding shares as per last report = 375 M shares. Therefore the fair value of COMS taken as a sum of its parts = 14000/375 = 37.33 / share. To me that is the minimum buyout price with no premium and by extrapolating revenues of a down quarter. But who says WS looks at value. It wants momentum and jazz and is ready to shower 50,100,200 times revenue multiples on companies who have yet to print their first annual report. -Hitesh