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

To: JDGarza who wrote (31220)	5/25/1999 3:52:00 AM
From: Freeflight	Read Replies (1) \| Respond to of 45548

NICs, fell nearly 13 percent from 14.4 million in 1998's fourth quarter to 12.6 million units this past quarter, according to the Cahners In-Stat Group market research firm. Revenue also plummeted, from $1.06 billion to $860 million. The slowdown results from slower PC sales, too much inventory in the network of PC resellers called the channel, and PC makers' increasing incorporation of networking features onto the main circuit board (or "motherboard") because it's cheaper, said Cahners In-Stat analyst Mike Wolf. Sales of networking cards are directly tied to PC sales because businesses tend to buy them together, Wolf elaborated. The first quarter was a disappointing quarter, but part of the reason is last year's fourth quarter was strong as PC makers lowered prices and sold more PCs to improve sales, he said. Wolf, who expects a slight rebound with single-digit growth next quarter, said there were two major surprises in the first-quarter results: slower growth in sales of Fast Ethernet cards and gigabit-speed Ethernet cards. Fast Ethernet shipments shrank 10 percent, while gigabit Ethernet fell 8 percent after 100 percent growth the previous quarter. "Fast Ethernet had been plugging along, growing nearly every quarter," Wolf said. PC makers are finding it cheaper to install the network connections directly on the motherboard, according to Wolf. Shipments of network connections on the motherboard increased five percent to 28 percent of the total market, while NICs themselves fell to 72 percent of the market. Compared to last year, the NIC market grew to 12.6 million units from 10.8 million units. But during that span, revenue fell slightly, from $879 million in 1998's first quarter to $860 million in the first quarter of this year. Wolf said a continuing price war between Intel and 3Com contributed to the falling revenue. "Intel and 3Com are beating each other over the heads and prices are coming down pretty quickly," he said. Intel gained some ground, but 3Com is still the market share leader, having shipped 5.2 million units to claim 41.6 percent of the market. Intel shipped 3.08 million units, or 24.6 percent of the market, according to the study. In the previous quarter, 3Com shipped 6.35 million NICs for 44 percent of the market, compared to Intel's 3.38 million NICs, or 23.5 percent. During that time span, 3Com's revenue fell nearly a quarter, from $445.9 million to $335 million, while Intel dropped from $229 million to $199 million. The lower revenue has already shown itself in 3Com's tepid third quarter. But the lower revenue doesn't affect Intel as much since its business is still primarily processors, he said. Wolf said he expects gigabit-speed Ethernet will be a high growth area for years to come as businesses move to the higher speeds. Today, gigabit NICs are fiber-based, but copper-based gigabit cards will be available this fourth quarter and will drive growth, he said.