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: James F. Hopkins who wrote (29332)	3/29/1999 2:24:00 PM
From: George Elliott	Respond to of 45548

fyi, some news in the latest issue of Individual Investor: "Weapon of Choice 3Com's not selling PalmPilot has given the company a consumer brand, and maybe an edge on rival Cisco sysems." (p.5) "The latest model..Palm iii, is equipped w/ an infrared light that can beam messages or files to other Palm-pilots, or even double as a television remote. Palm VII, due out midyear, will enable wireless connection to the Internet. Coveted by corporate status seekers, PalmPilot (PP) has 72% of the market for personal digital assistants, ....But is that enough to give 3Com an edge over CSCO, the 800 pound gorilla of the networking hardware? In the arena where the 2 companies compete, selling hubs, routers, and switches that direct data flow through computer networks, CSCO is dominant, and its sales are rising faster than those of 2d place 3C. So wherever possible, 3C's strategy has been to stay out of CSCO's way, conceding the high end of the market. Instead 3C ...focuses on low-end switches and on other markets where CSCO isn't dominant, such as computer interface cards and modems that appeal to individuals and to small and midsize businesses. Its a fertile field: fewer than a third of small businesses have a computer network. But now CSCO has set its sights on that market, too, with plans to link everyting from kitchen appliances to TVs to computers, via the Internet-imagine preheating your oven from the computer in your car. Where does that leave 3C? Enter the PP. Sales of the handheld device are rising faster than any of 3C's other products. True, they still accounted for only 10% of 3C's 2d Q revenue of $1.5 billion, but the PP gives 3C an advantage as networking products move into the home, establishing the company as a brand name player in the consumer market. That is comething CSCO has not achieved. Besides the PP, 3C is developing software that will enable cable networks to support voice, TV, and the Internet, as well as digital subscriber line modems that speed Web connctions, all of which generate higher margins than 3C's traditional analog modems. These new products reflect the buiness strategy of the CEO....(who co-founded one of the 1st computer networking companies, Bridge Comm., more than 10 years ago): producing high margin products in areas where 3C is not competing head to head with Cisco. For the most part, (CEO's) approach has been working, though there have been bumps: 3C's 97 merger with USR left the combined company with a glut of 56K modems. When they didn't sell, earnings tumbled.....In response, 3C revamped its inventory monitoring and control systems so that less time passes between payments, freeing money to put back into the business, and the company has bounced back quickly. ................(talks of 2d Q, misses talk of latest fiasco)........ But to keep maturing, 3c will have to keep Cisco at arms length, which it hopes to do with its new 'layer 3' network switch. Swithches create a dedicated channel that enables computers to communicate; they are fast but dumb, and they hog network space. Routers, Cisco's core products, send messages across networks in packets of info. rather than opening a direct channel; they are more efficient but slow. 3C's Layer 3..combine wits with speed and eliminate the need for routers. The company also is entering into strategic partnerships with such tech. giants as Siemens.., allowing 3c to challege Cisco in the emerging market of sending voice over computer networks and the Internet. .................................... Even if 3C remains in 2d place in the networking business, Gruntal's Takata thinks its earnings in FY 2000 will increase 49% and that the company should have a p/e in the middle 30s by 2000. That translates to a share price of at least $70. Its no wonder that Takata is pounding the table for the stock, which he proclaims "a buying opportunity!"