A profit warning from networks giant 3Com caused technology stocks to slump yesterday on fears of weakened profit margins across the board. It also made 3Com vulnerable to takeover from IBM as its share price has halved since the beginning of the year.
Six months ago, insiders at Big Blue said they were interested in buying 3Com but a rise in its financial fortunes put paid to that hope.
3Com said that it expected to turn in around 35 per cent lower profits in its third quarter, on increased turnover. In its third quarter last financial year, turnover was $606 million but the company said it expected turnover to grow to $770 to $810 million this quarter.
That, coupled with expected lower profits, created jitters on Wall Street. 3Com?s share price fell $13.50 yesterday, down to $37.25 at close of play. In January, prices were up to $75.
The plummet in 3Com?s fortunes was reflected in other players? share prices. Cisco fell $5 to $58, Intel sank $4.75 and even Microsoft?s stock fell by $2.63 to $97.95. The thin end of the wedge grew during the day, with Compaq, Hewlett Packard and Dell shares showing drops during the day.
The 3Com results will appear on March 20 and the company warned that changes between now and then could cause material differences from its forecasts.
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