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Wednesday, March 24, 1999
"Managers are people who do things right, and leaders are people who do the right thing." -- Warren Bennis
3Com Meets Slashed Estimates
Computer-networking company 3Com (Nasdaq: COMS) reported fiscal third-quarter earnings of $0.24 a share (excluding one-time items), up from $0.02 a year earlier but in line with the company's pre-announcement and analysts' forecasts that were diminished following the March 2 earnings warning. Prior to that, analysts had predicted EPS of around $0.36. Revenues for the quarter, which totaled $1.41 billion, were 13% higher than last year's $1.25 billion. But in the year-ago quarter, revenues were actually down 15% year-over-year.
3Com said it was able to maintain gross margins despite an unexpected slowdown in end-user demand in North America and Latin America. The company said in a conference call that fourth-quarter results should be better than this quarter's, which is traditionally the case, but added that sequential sales growth will be "modest" this year. The company plans to shift workers and expenses from slower, more mature businesses to higher growth areas, such as its Palm Pilot unit and cable modem and set-top box operations.
Separately, the company announced plans to buy back up to 10 million shares, or 2.7% of the number outstanding. This brings the total number of shares authorized for repurchase to 12 million.
News to Go
Disk-drive maker Read-Rite Corp. (Nasdaq: RDRT) warned that it expects fiscal second-quarter revenues to come in about 10% below the $230.2 million it posted for the first quarter ended December 31, which will result in a loss for the second quarter. The company plans to release results at the close on April 14.
Japanese Internet investment firm Softbank will set up a joint venture with Microsoft (Nasdaq: MSFT) and Yahoo! (Nasdaq: YHOO) to advertise and sell cars online through a Japanese branch of Microsoft's CarPoint website beginning in November. Softbank will hold a 50% stake in the venture, Microsoft will take 40%, and Yahoo! Japan will get 10%. Softbank owns roughly 28% of Yahoo!.
Financial services giant Citigroup (NYSE: C) has agreed to buy Mellon Bank's (NYSE: MEL) credit card business for an undisclosed price. The deal, which involves 800,000 accounts and $1.9 billion in loans, will boost Citigroup's cards in circulation to 70 million in the U.S. and 96 million worldwide. As part of the agreement, Citigroup will be able to market credit cards under the names of Mellon and its Dreyfus mutual fund group. Separately, Citigroup said it sold its Newbridge Securities unit to Donaldson Lufkin & Jenrette (NYSE: DLJ) for undisclosed terms.
AMR Corp.'s (NYSE: AMR) American Airlines is increasing its presence in California, adding flights within the state and repositioning its newly acquired Reno Air unit to more directly compete against UAL Corp.'s (NYSE: UAL) United Airlines. American will add flights between San Jose and both San Diego and Orange County, California, beginning in May. In addition, Reno will fly between San Francisco and Orange County, a route United has flown alone.
Cable TV operator MediaOne (NYSE: UMG) and U.K. telecommunications giant Cable & Wireless (NYSE: CWZ) may sell or spin out their One2One mobile-phone joint venture. Possible buyers include Deutsche Telekom (NYSE: DT), Mannesmann Telekom, Bell Atlantic (NYSE: BEL), and SBC Communications (NYSE: SBC).
Drug maker Forest Laboratories (NYSE: FRX) got a warning letter from the Food and Drug Administration (FDA) saying that the company improperly conducted potency tests on several drugs, including its antidepressant Celexa. Continued problems could prompt the FDA to reject further results from the company.
Share Buybacks: Computer chip maker DSP Group (Nasdaq: DSPG) intends to repurchase up to 1 million shares, or 8.5%, of its common stock... Insurance and retirement savings company Allmerica Financial (NYSE: AFC) plans to buy back up to $200 million in stock... Linens and towels maker Pillowtex Corp. (NYSE: PTX) said it will buy back up to 1 million shares... Catheter maker Arrow International (Nasdaq: ARRO) said it intends to repurchase as many as 1 million shares, or about 4.3% of its outstanding shares.
Read a Foolish message board post on Dell Computer... Mr. Tom Gardner goes to Washington to testify on securities fraud on the Internet. Read the transcript... Check out an interview with Network Appliance CEO Dan Warmenhoven.
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