Fool readers know that prospects for the telecom equipment industry remain iffy. No one's making much money in this business, and most players, from Alcatel
It was for this reason that back in February I took a look at telecom equipment maker Ciena
Today, I want to look at another possible Green Gene in the telecom equipment sector. (And no, sorry, Nortel
3Com reported its fiscal first quarter earnings results on Thursday. Basically, they were more of the same results that fellow Fool Mark Mahorney wrote up three months ago. Despite increasing revenues a hair and drastically cutting its operating costs, the company continued to lose money -- about $0.09 per diluted share. That's a huge improvement over last year's $0.29 deficit, but a loss is still a loss.
What's really intriguing about the company, though, is its cash hoard. Or more generally, its net net working capital (cash + (0.75 * accounts receivable) + (0.50 * inventory) - total liabilities), which is the amount a company would be worth if it shut its doors, collected all the debts it could collect, and held a fire sale of its inventory -- then distributed all the loot to shareholders.
In 3Com's case, the company has net net working capital equal to 60% of its current $1.7 billion market cap. That's close enough to put this company on my value-seeking radar. Before I buy, though, I want to see one of two things happen: Either 3Com must fall in value by another 20-odd percent, or it must reverse its history of negative free cash flow. If either of those happens, that would make 3Com a deep value "buy" for this Fool.
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Fool contributor Rich Smith owns no shares in any of the companies mentioned here.