"No kidding", said disappointed 3Com stockowner Adam Rifkin, who spent
most of Thursday debugging software to keep from getting depressed about
the irrational exuberance he displayed upon hearing about the takeover
Wednesday night from one Rohit Khare.
Meanwhile, he continues to watch Bay Networks and Shiva...
------------------------ 8< ---------------------------------------
NEW YORK, Feb 27 (Reuter) - Shares of network stocks fell on Thursday amid
fears that 3Com Corp"s (COMS.O) merger with U.S. Robotics Corp (USRX.O)
would heap new burdens on an industry already struggling with a raft of
near-term issues.
Analysts said the $7.3 billion merger plan boosted pressure on other
network players to use their discounted shares as currency to fund major
acquisitions of their own.
Some said 3Com"s $7.3 billion offer for U.S. Robotics stock and options
put a low-ball valuation on the modem maker of 20 times 1997 earnings,
versus a historic 25 times multip
"If anything this deal is more of a take-under than a takeover," Salomon
analyst Peter Swartz said of the 3Com deal.
"This deal says the days of the 35 to 40 percent premiums paid in previous
networking acquisitions are over," Swartz said, noting many stocks were
now trading at historic lows.
"Both stocks are down 50 percent from their highs," he pointed out.
By midafternoon, U.S. Robotics shares were up 1/4 at 61-1/4, well below
the 68-1/4 contemplated by the terms of 3Com"s merger offer. 3Com stock
was off 3-1/2 points at 35-1/2.
Donaldson Lufkin analyst Eric Buck harshly criticized the terms of the
deal. "I think U.S. Robotics shareholders are being robbed," he said.
In the wake of the deal, industry leader Cisco Systems Inc (CSCO.O) was
down 2-1/8 to 56, Ascend Communications Inc (ASND.O) lost 4-3/8 points to
58 and Cascade Communications Corp (CSCC.O) was down 2-1/8 to 30-1/2.
"We believe the competitive landscape of the networking sector is
undergoing a fundamental restructuring," J.P. Morgan"s Bill Rabin said in
published comments. "Other networking vendors will have to combine or be
bought."
Still, Rabin reiterated buy ratings on four stocks in the sector, while
maintaining his market perform rating on 3Com. Swartz also kept his buy
rating on 3Com shares, and recommended investors take advantage of price
weakness.
The main beneficiaries of the 3Com-Robotics deal appeared to be Bay
Networks Inc (BAY.N) and Shiva Corp (SHVA.O) -- two stocks that have sat
in the doghouse for some time -- based on their potential as acqusition
targets, analysts said.
Shiva rose 9/16 to 15-13/16, recovering from its historic low, while Bay
added 1/8 to 19-3/8. ider
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adam@cs.caltech.edu
The pessimist complains about the wind.
The optimist expects it to change.
The realist adjusts the sails.
-- William Arthur Ward