STOCKREPORTS		 3Com Corporation Nasdaq Symbol COMS
In S&P 500
22-JUL-97 Industry:
Computers (Networking)		 Summary: This computer networking company makes a range of products, including adapters, hubs and routers for Ethernet, Token Ring and high-speed networks.

Recent Price 54.00
52 Wk Range 78.94 - 26.75		 Yield Nil
12-Mo. P/E NM

Quantitative Evaluation:
Outlook (1 Lowest - 5 Highest)
5-
Fair Value
75.40
Risk
HIGH
Earn/Div Rank
B-
Technical Evaluation:
BEARISH since 02/97
Rel. Strength Rank (1 Lowest - 99 Highest)
90
Insider Activity
NA

Overview 10-JUN-97

We see the company completing FY 97 (May) with sales growth of 28% in the fourth quarter. While strong, sales growth slowed in the second half from more than 40% revenue growth experienced in the first half. The decreased growth rate reflects greater competition and lower ASPs (average selling prices) in stackable hubs and the adapter card market. Adapter cards accounted for 44% of sales in the FY 97 third quarter. While these factors will hurt near-term comparisons, COMS is still experiencing strong growth in the LAN switching segment and seeing revenue momentum from new products in the enterprise hub and remote access markets, the former reflecting the Chipcom acquisition. We see EPS growth of more than 20%, to $2.50, for FY 98.

Valuation 10-JUN-97

We are maintaining our buy opinion on the shares. We view the planned merger with U.S. Robotics (expected to close mid-June 1997) as very complementary to both companies, with very little product overlap. With this merger, COMS solidifies its position among the networking industry's top tier, with a complete end-to-end product line. This should help it participate fully in the strong industry growth expected in the years ahead. Trading at an attractive multiple based on our FY 98 EPS estimate of $2.50, versus a long-term growth rate of 20% to 25%, the shares represent a strong buying opportunity for aggressive investors.

Key Stock Statistics

S&P EPS Est. 1997 2.02
P/E on S&P Est. 1997 26.7
S&P EPS Est. 1998 2.50
Dividend Rate/Share Nil
Shs. outstg. (M) 333.2
Avg. daily vol. (M) 10.013
Tang. Bk. Value/Share 5.80
Beta 1.50
Shareholders 3,000
Market cap. (B) $ 18.2
Inst. holdings 28%
Value of $10,000 invested 5 years ago:$ 192,000

Fiscal Year Ending May 31

Revenue (Million $)
1997 1996 1995 1994 1993 1992
Q1 707.0 497.3 249.3 162.1 135.6 86.60
Q2 820.3 563.5 304.8 205.3 152.7 97.80
Q3 786.8 606.0 338.7 218.2 161.4 102.3
Q4 829.9 660.3 402.5 241.5 167.5 121.7
Year 3,147 2,327 1,295 827.0 617.2 408.4

Earning Per Share ($)
1997 1996 1995 1994 1993 1992
Q1 0.52 0.33 0.21 0.20 0.05 0.02
Q2 0.57 0.09 0.02 0.16 0.07 0.03
Q3 0.47 0.42 0.32 -0.82 0.08 -0.05
Q4 0.48 0.17 0.33 0.19 0.10 0.04
Year 2.02 1.01 0.87 -0.23 0.31 0.04

Dividend Data: No cash has been paid. Two-for-one stock splits were effected in September 1994 and August 1995.

Business Summary 28-MAR-96

3Com is a leading global data networking company that provides a range of networking solutions that include adapters, hubs, routers and switches for Ethernet, Token Ring and other high speed networks. Foreign operations, including exports, accounted for 54% of revenues in FY 95 (May).

Network adapters accounted for 53% of total revenues in FY 95. Net systems products (hubs, bridges/routers, LAN switches, network management, and remote access servers) accounted for 43%, and other products and services 4%.

Network adapters, also known as network interface cards (NICs), are add-in printed circuit boards that allow desktop computers to connect to the local area network (LAN). The company is the world's largest supplier of Ethernet network adapters, with an estimated 34% market share as of December 31, 1994.

COMS designs, makes and markets a full range of Ethernet Token Ring and FDDI hubs in both stackable and chassis-based configurations. Hubs provide the physical connection between network elements. Bridges and routers control the flow of data between LANs, allowing connectivity between networks. LAN switches provide high-speed links between multiple network segments. The company's Transcend network management architecture allows network administrators to monitor traffic and diagnose problems from a single, remote location.

In October 1995, the company acquired Chipcom Corp., a leading manufacturer of high-end hubs, in exchange for 18.2 million common shares and options to purchase 2.4 million shares. Chipcom had 1994 revenues of $268 million. In June 1995, COMS acquired Primary Access Corp., a provider of network access products for the public switched-data market.

Important Developments

Mar. '96 COMS acquired Newton, MA-based Axon Networks Inc., a leader in remote monitoring data network traffic, for $65 million cash. It is expected to record a related pretax charge of $45 million to $50 million in the FY 96 (May) fourth quarter.
Feb. '96 The company was chosen by CompuServe to provide high-speed dial access to the CompuServe network. COMS will supply CompuServe with its AccessBuilder 8000 remote access platform, integrating V.34 modem and digital T1 capabilities.

Capitalization

Long Term Debt: $110,000,000 of sub. notes conv. into com. at $34.563 a sh. in 1997 (2/96).

Per Share Data ($)
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
Tangible Bk. Val. NA 5.80 3.36 2.16 2.09 1.80 1.75 1.91 1.67 1.42
Cash Flow NA 1.52 1.18 0.02 0.50 0.23 -0.05 0.37 0.44 0.27
Earnings 2.02 1.01 0.87 -0.23 0.31 0.04 -0.24 0.18 0.29 0.20
Dividends Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
Payout Ratio Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
Cal. Yrs. 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Prices - High 81 3/8 53 5/8 26 5/8 12 1/8 7 1/2 3 1/8 4 3/4 7 1/4 6 6 1/2
- Low 33 1/2 22 1/4 10 1/8 4 7/8 2 7/16 1 3/8 1 3/8 2 1/2 3 7/8 3 1/8
P/E Ratio - High 40 53 31 NM 24 84 NM 40 20 33
- Low 17 22 12 NM 8 37 NM 14 13 16

Income Statement Analysis (Million $)
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
Revs. NA 2,327 1,295 827 617 408 399 419 386 252
Oper. Inc. NA 515 306 164 85.4 33.9 41.5 55.9 68.9 46.6
Depr. NA 91.0 46.7 30.6 25.1 21.6 22.7 22.5 16.7 8.1
Int. Exp. NA 12.6 6.9 NA NA NA NA NA NA NA
Pretax Inc. NA 308 198 19.5 60.2 5.2 -44.6 32.8 54.2 38.9
Eff. Tax Rate NA 42% 37% 247% 36% 49% NM 38% 37% 42%
Net Inc. NA 178 126 -28.7 38.6 4.2 -27.7 20.5 34.3 22.5

Balance Sheet & Other Fin. Data (Million $)
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
Cash NA 499 324 130 117 78.7 97.5 86.7 43.1 60.7
Curr. Assets NA 1,240 708 361 304 229 218 229 188 164
Total Assets NA 1,525 840 444 368 294 271 294 247 196
Curr. Liab. NA 415 264 163 108 87.1 71.4 59.0 36.4 34.4
LT Debt NA 110 111 1.1 0.6 1.5 0.3 0.8 3.4 2.2
Common Eqty. NA 979 465 281 258 199 190 232 206 157
Total Cap. NA 1,105 576 282 259 200 192 235 211 161
Cap. Exp. NA 180 76.2 36.5 22.3 21.5 26.6 25.8 23.7 18.9
Cash Flow NA 269 172 1.9 63.7 25.7 -5.0 43.0 51.0 30.6

Curr. Ratio NA 3.0 2.7 2.2 2.8 2.6 3.1 3.9 5.2 4.8
% LT Debt of Cap. NA 10.0 19.3 0.4 0.2 0.7 0.2 0.4 1.6 1.4
% Net Inc.of Revs. NA 7.6 9.7 NM 6.2 1.0 NM 4.9 8.9 8.9
% Ret. on Assets NA 13.7 19.6 NM 11.1 1.5 NM 7.5 15.2 12.7
% Ret. on Equity NA 22.1 33.7 NM 16.0 2.1 NM 9.3 18.6 15.4

Data as orig. reptd.; bef. results of disc. opers. and/or spec. items. Per share data adj. for stk. divs. as of ex-div. date. E-Estimated. NA-Not Available. NM-Not Meaningful. NR-Not Ranked. EPS incl. 0.56 of nonrecurring charges in 1994-95.

Office--5400 Bayfront Plaza, Santa Clara, CA 95052-8145. Tel--(408) 764-5000. Chrmn, Pres & CEO--E. A. Benhamou. VP-Fin & CFO--C. B. Paisley. VP & Secy--M. D. Michael. Investor Contact--Kate Patterson. Dirs--J. L. Barksdale, E. A. Benhamou, G. A. Campbell, D. W. Dorman, J.-L. Gassee, S. C. Johnson, P. C. Kantz, W. F. Zuendt. Transfer Agent--First National Bank of Boston. Incorporated--in California in 1979. Empl--4,769. S&P Analyst: John D. Coyle, CFA


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