3Com Corp. (NASDAQ: COMS) shares are up around 12% so far today after the network equipment maker raised its first-quarter sales and profit forecasts due to gains in China. Not only did 3Com raised guidance, it also raised it above analyst estimates.3Com, which makes routers, switches and cables for telephone companies, has more than quadrupled sales in China since buying out Huawei's stake in their joint venture H3C last year. China now accounts for almost half the sales at 3Com.
Some may be concerned due to recent reports of China's slower economic growth. But two things are worth mentioning here. First, China's slower GDP growth is still a whopping 9%, down from 11%. And second, telecom infrastructure will likely continue at the same pace.
It isn't surprising, then, that 3Com has raised guidance for both sales and earnings. Specifically, 3Com expects sales in China to be 10% higher than in the previous quarter on stronger sales to Huawei.
On the flip side, however, the company said it expects the "longer-term trend of declining sales to Huawei -- as a percentage of total sales and in absolute dollars -- to continue." In all other geographies outside of China, the company expects networking segment to deliver modest sequential growth.
So while the stock climbed today the most it has since 2007, year-to-date it has dropped 59%, according to Bloomberg. The stock is trading just above $2 a share as it tries to recover from the takeover that collapsed in March when Bain and Huawei walked away. Despite today's good news, it seems that the long-term growth prospects are still shaky, and the stock will likely go nowhere from here.
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Reader Comments (Page 1 of 1)
8-06-2008 @ 2:58AM
AC Investor Blog said...
Dear Melly.
I not agree with you. Here is my technical opinion.
Shares of 3Com Corp surged more than 10% after the company raised its first-quarter sales and profit forecasts amid gains in China. 3Com Corp expects its first quarter results to be stronger than expected due to solid performance its China operations. It expects sales in China to be 10% higher than in the fourth quarter. Company also said it expects to end Q1 with about $530 million in cash. Even with the spike today, the cash position is about 64% of 3Com’s $851 million market cap, in my honest opinion this is a good stock to hold if you're long. Currently stock has a high level of shorts and any further good news could force these bearish bets to cover and thus provide another round of buying pressure, or in the other hand if the price holds or raises, the short squeeze will happen. Looking at the daily chart, 3Com Corp is coming back to life after has broken the descending triangle pattern with good volume. In addition KD show buy signal as K line has just rose above D line. Based on current trend the stock may go till $2.19 per share or the 50 day moving average before facing the next resistence. The stock now looks poised to move higher.
AC Investor Blog